Purchase Order

What is a purchase order?

A purchase order (PO) is a document a buyer sends to a seller to formally authorize a purchase. It specifies what is being bought, the quantities, agreed-upon prices, and delivery expectations. Once accepted by the seller, it becomes a binding agreement between both parties.

For contractors, you will most often encounter purchase orders when working with larger companies, government agencies, or organizations with formal procurement processes.

Purchase order vs. invoice

A purchase order comes before the work. It is the buyer saying I want to buy this at this price. An invoice comes after the work. It is the seller saying here is what you owe. The PO number is usually referenced on the invoice to connect the two documents.

When purchase orders are used

Purchase orders are common in commercial and government contracting, large-scale projects with multiple deliverables, organizations with accounts payable departments, and any situation where pre-approval of spending is required before work can begin.

How to work with purchase orders

When a client issues a PO, review the details carefully to ensure they match your estimate or quote. Reference the PO number on all invoices for that project. This speeds up payment processing because the client's accounts payable team can match your invoice to the approved PO.