What Is a Purchase Order?
A purchase order (PO) is a formal document sent by a buyer to a supplier requesting goods or services at a specified price and delivery schedule. It acts as a contract and outlines the items ordered, their quantity, cost, and terms.
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These documents are essential in the procurement process, offering transparency, spend control, and a paper trail that protects both buyers and vendors.
Understanding the PO Process
Here’s how a typical PO workflow unfolds:
- A team identifies a need for goods or services.
- A purchase requisition is created and approved internally.
- A formal purchase order is issued to the vendor.
- The vendor accepts or rejects the request.
- Goods or services are delivered.
- An invoice is raised, referencing the PO.
- The invoice is matched with the PO and approved for payment.
This structured approach reduces disputes and provides clarity. Zahara automates and tracks these steps via a central platform. Learn more about Zahara’s purchase order software.
When to Use a PO
Use purchase orders when:
- You want to control expenditure before purchases happen
- Suppliers need formal documentation to fulfil an order
- Internal visibility of committed spend is important
- You’re managing large or recurring purchases
For online-only suppliers that don’t accept external documentation, POs may not be needed.
Benefits of Purchase Orders for Business
For Buyers:
- Improved visibility into committed spend
- Enforced pre-approval for purchases
- Easier budgeting and planning
For Suppliers:
- Clear details on incoming orders
- Payment assurance from documented agreements
- Easier fulfilment with standardised formats like CSV or JSON
Key Components of a PO Document
A good purchase order should include:
- PO number
- Order and delivery dates
- Buyer and supplier information
- Delivery address
- Currency and pricing
- Product descriptions and SKUs
- Quantities
- Unit and total costs
- Tax and payment terms
- Any legal terms and conditions
Zahara provides flexible templates with all these elements. You can also link to your full company terms online.
Sample PO Layout
| Field | Description |
|---|---|
| PO Number | Unique ID for tracking |
| Order Date | When the PO is issued |
| Delivery Date | When goods/services are needed |
| Buyer Info | Legal entity and contact details |
| Supplier Info | Name, address, contact details |
| Line Items | Products or services, SKUs, quantity, unit cost |
| Totals | Subtotal, taxes, final amount |
| Payment Terms | e.g. Net 30, upon delivery |
| Notes | Special instructions or terms |
Types of Purchase Orders Explained
Several types of POs are used depending on needs:
- Standard Purchase Order – For single, one-off transactions.
- Blanket Purchase Order – For repeated purchases over time, often with volume pricing.
- Standing Purchase Order – For regular deliveries under a single reference.
Each type supports a different procurement approach.
Preferred PO Formats: PDF, CSV or JSON?
Suppliers have format preferences. Zahara supports:
- PDF – Ideal for straightforward orders
- CSV – Best for processing bulk items
- JSON – Designed for system-to-system integrations
Ask vendors which format suits them to reduce delays and errors.
Handling Terms and Conditions in POs
Payment terms on POs may differ from those on supplier invoices. For example:
| Buyer’s PO | Supplier’s Invoice |
|---|---|
| Net 60 days | Net 30 days |
Which terms apply? Often, whoever sets them clearly first. Some suppliers won’t process orders unless their terms are met. Referencing your own terms and linking to them helps establish precedence.
Zahara’s templates allow you to insert these links automatically. See Zahara’s PO templates.
How to Create a Strong PO
- Use supplier-specific product codes
- Specify unit types (e.g., box, litre)
- Indicate currency
- Define clear payment terms
- Keep the document legible
- Include a CSV for multi-line orders
- Ensure only authorised personnel send POs
Invoice Automation Powered by POs
One major benefit of using a purchase order is its role in automating invoice processing. Zahara links orders, goods received, and invoices into one seamless process. This reduces data entry and eliminates mistakes.
Learn more about invoice processing with Zahara.
Zahara vs Manual PO Management
Procurement and finance teams often compare automated tools like Zahara to manual processes. Here’s how they differ across cost, speed, and accuracy:
| Dimension | Zahara (Automated PO Software) | Manual PO Process |
|---|---|---|
| Cost Savings | According to the American Productivity & Quality Center (APQC), organisations with top-performing PO automation can process a purchase order for as little as $35. Zahara’s automation eliminates paper, manual data entry, and rework — all of which contribute to lower cost per PO. | APQC reports that the median cost to process a manual PO is $217, with bottom performers spending over $500 per order. Labour time, rework, and delays drive costs significantly higher than automated alternatives. APQC Research. |
| Time Efficiency | World Bank research on e-procurement found that digital procurement platforms reduce processing time by up to 60%. Zahara enables users to raise POs, route for approval, and send to suppliers in minutes — with workflows optimised for real-time approvals. | Manual PO processes often rely on spreadsheets, emails, and physical documents. Delays from approval bottlenecks and data entry extend processing time — with average PO cycles taking 5 to 10 days. OECD E-Procurement Report |
| Error Reduction | Deloitte research indicates that automation can reduce transaction errors by up to 37% in the procure-to-pay cycle. Zahara enforces required fields, prevents duplicates, and maintains an auditable trail for every purchase order. | Manual POs are prone to miscommunication, missing fields, and data entry errors. The Harvard Business Review notes that human error is a key driver of procurement exceptions and disputes. Deloitte Global CPO Survey |
With Zahara, businesses can save time, cut costs, and reduce errors in raising and sending purchase requests — all while maintaining transparency.
PO vs Invoice: Key Differences
| Purchase Order | Invoice |
|---|---|
| Created by the buyer | Created by the supplier |
| Sent before delivery | Sent after delivery |
| Outlines what will be supplied | Confirms what was supplied |
| Includes proposed payment terms | Includes payment due date |
Purchase Order FAQ
Yes — once accepted by a supplier, it becomes a contract.
Not necessarily. Online-only vendors may not require them.
Yes — choose from PDF, CSV, or JSON.
Final Thoughts on Purchase Orders
Purchase orders help teams manage spend, give suppliers clarity, and reduce disputes. With Zahara, you can streamline approvals, delivery, and invoice reconciliation from one platform.
Ready to improve your purchasing process? Book a demo with Zahara or explore our pricing.
Suggested Reading
Explore more articles on Zahara’s blog to deepen your understanding of purchase orders and best practices:
- 👉 The Importance & Benefits of Purchase Order Approvals
Learn how implementing a structured PO approval process can enhance financial control and operational efficiency. - 👉 Do You Have the #1 Best PO System?
Evaluate your current PO system and explore features that define an effective purchase order management solution. - 👉 What Does a Healthy PO System Look Like?
Identify the characteristics of a robust PO system and understand how it contributes to seamless procurement.
