What is Purchase Order?
A purchase order (PO) is a commercial document issued by a buyer to a seller, authorizing a purchase and specifying the items, quantities, and agreed prices.
A purchase order (PO) is a legally binding document issued by a buyer to a seller, formally authorizing a purchase. Once accepted by the seller, it becomes a contract between both parties.
The purchase order process: 1. Buyer creates and sends a PO 2. Seller reviews and accepts/rejects 3. Seller delivers goods/services 4. Seller invoices, referencing the PO number 5. Buyer pays the invoice
What a PO should include: - PO number (unique identifier) - Buyer and seller details - Item descriptions and quantities - Agreed prices - Delivery date and address - Payment terms - Terms and conditions
Why PO numbers matter for invoicing: Many companies (especially larger ones) require a PO number on invoices for payment processing. Without the correct PO reference, your invoice may be rejected or delayed.
Tips for freelancers: Always ask if your client needs to issue a PO before you start work. Include their PO number prominently on your invoice to speed up payment.
Examples
A corporate client issues PO-2026-0042 before commissioning design work
A contractor references PO number on all invoices to the main contractor
A supplier won't ship goods until receiving a valid PO
Related Terms
Invoice
An invoice is a commercial document issued by a seller to a buyer, listing the products or services provided and requesting payment.
Proforma Invoice
A proforma invoice is a preliminary bill sent before goods are delivered or services are completed, showing the estimated costs and terms.
Accounts Receivable
Accounts receivable (AR) is the money owed to a business by its customers for goods or services delivered but not yet paid for.
Put This Into Practice
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