How to use this purchase order template
You are the buyer, so your business goes in the Buyer block and the supplier in Vendor. Fill in Ship to only if goods should go somewhere other than your own address, such as a job site, a warehouse dock or a customer; left blank, the PO prints "Same as buyer". Put the vendor's quote number in Vendor quote / reference so their order desk can match your prices to what they offered.
The Delivery date starts 14 days after the order date and moves with it; change it to the date you actually need. List each item at the price you agreed. Freight can go under Shipping / other charges, which is added after tax and not taxed (see the worked example for the difference this makes). The default terms ask the vendor to quote the PO number on invoices and packing slips, reserve your right to inspect goods and set Net 30 from a correct invoice; edit them to match your arrangement. Each PO prints an Authorized by signature line and a date.
Download as Word or PDF and send it to the vendor; keep a copy to match against their invoice later.
What a purchase order is, and who issues it
A purchase order (PO) is a document the buyer sends to a supplier to order goods or services on stated terms. It says: we want these items, in these quantities, at these prices, delivered here by this date, and we will pay on these terms. When the supplier accepts it, by confirming in writing or simply by shipping, the PO generally becomes a binding contract.
That direction is the thing people most often get backwards. A quote comes from the seller; a PO comes from the buyer; an invoice comes from the seller again. The PO sits in the middle, converting the seller's offer into the buyer's commitment.
For a small business the PO does three practical jobs:
- It gives the supplier a clear, written order so nothing is lost in a phone call.
- It creates a record of what you committed to spend before the invoice arrives.
- It gives you a number that the supplier must quote on their invoice, which is what makes checking that invoice fast.
Purchase order vs. invoice
| Feature | Purchase order | Invoice |
|---|---|---|
| Issued by | Buyer | Seller |
| When | Before goods ship | After goods ship or services are delivered |
| Says | "We agree to buy this" | "You owe us this" |
| Legal effect | Offer, binding on acceptance | Demand for payment under the contract |
| References | Vendor's quote | The PO number |
The two documents should agree on items, quantities, and prices. When they do not, the difference is either an error or an unapproved change, and the PO is what lets you tell.
PO numbering and the PO log
Number POs the way you number invoices (the FAQ below lists common schemes), but keep the log differently. An invoice log tracks money coming in; a PO log tracks money you have committed to spend. For each number record the vendor, date, amount and a status: open, received, invoiced, paid. The open POs are spending that has not reached your bank account yet. The template starts at PO-1001 and keeps whatever number you last used in this browser until you clear the form; it does not count up on its own.
Three-way matching
Three-way matching is the control that makes purchase orders worth the effort. Before an invoice is paid, three documents are compared:
- The purchase order – what you ordered and at what price.
- The receiving report (packing slip, delivery note, or a signed confirmation that services were performed) – what actually arrived.
- The supplier's invoice – what you are being asked to pay.
If all three agree, pay the invoice. If they do not, hold it and find out why. Common mismatches and what they mean:
| Mismatch | Likely cause | Action |
|---|---|---|
| Invoice quantity > received quantity | Short shipment or billing error | Pay for what was received; request credit |
| Invoice price > PO price | Price increase not agreed, or wrong price list | Query before paying |
| Invoice items not on PO | Substitution, upsell, or wrong customer | Approve as a change or reject |
| No PO number on invoice | Order placed informally | Trace who ordered it; issue a retrospective PO if legitimate |
Even a two-person business benefits from a light version: staple the packing slip to the PO copy when goods arrive, and pay invoices only against that pair. It catches short shipments and double-billing that would otherwise be paid without anyone noticing.
Approval workflows for small teams
A PO system does not need software to work. What it needs is a rule about who can commit the business to spending money. A workable approach for a team of two to twenty:
- Under a set threshold (say $500), any team lead can raise and sign a PO within their budget.
- Above the threshold, the owner or a designated approver signs before it is sent.
- Above a second threshold (say $5,000), two quotes are required and attached to the PO.
- Nothing is ordered without a PO number, and suppliers are told that invoices without one will be returned.
Write the thresholds on one page, share it with the team and the suppliers, and review it once a year. Most overspending in small businesses is not fraud; it is three people each ordering the same thing because nobody knew who was responsible.
PO terms: delivery, payment, cancellation
The terms field prints under the totals. Cover the points that cause disputes:
- Delivery. Required date, address (use the "Ship to" block), who pays freight, and what happens if delivery is late. For goods, state the shipping terms (e.g. FOB destination) so it is clear who bears risk in transit.
- Payment. When you will pay (Net 30 from receipt of a correct invoice is standard), how, and that invoices must quote the PO number.
- Inspection and rejection. Goods are subject to inspection on receipt; non-conforming or damaged goods may be returned at the vendor's expense within a stated number of days.
- Cancellation. Whether you may cancel before shipment without charge, and whether the vendor may cancel. Custom or made-to-order goods usually carry a cancellation fee; agree it up front.
- Substitutions. Not permitted without written approval.
- Price. Prices on the PO are fixed unless agreed in writing; no charges not shown on the PO will be paid.
Two or three lines on each is enough. If the vendor's order confirmation carries terms that conflict with your PO, which terms apply depends on how the order was accepted and on local law (for US sales of goods, the "battle of the forms" rules in UCC §2-207). Read their confirmation and settle conflicts in writing rather than assuming your terms win.
Worked example
A landscaping company orders paving materials for a job. Its PO-1027, dated September 24, 2026, requests delivery to the job site by October 8:
| Description | Qty | Unit price | Amount |
|---|---|---|---|
| Bluestone pavers, 24 × 24 in, per pallet | 6 | $485.00 | $2,910.00 |
| Polymeric sand, 50 lb bag | 20 | $32.50 | $650.00 |
| Delivery to site | 1 | $175.00 | $175.00 |
Subtotal $3,735.00. The vendor agreed a 5% trade discount ($186.75), bringing the taxable amount to $3,548.25. Sales tax at 7% adds $248.38 for an order total of $3,796.63. Because delivery is a line item here, it is discounted and taxed with the goods. Entered under "Shipping / other charges" instead, the PO would show a subtotal of $3,560.00, a $178.00 discount, $236.74 tax and $175.00 delivery, for $3,793.74. Which is right depends on what you agreed with the vendor and on your state's treatment of delivery charges. When the pallets arrive, the site foreman counts six pallets and twenty bags and signs the delivery note. When the invoice arrives quoting PO-1027 for $3,796.63, it matches all three documents and is paid on Net 30 terms. Had the invoice shown seven pallets, the foreman's count would have caught it.
When you need a PO system
This template is enough when you raise a few POs a month and keep a log in a spreadsheet. Consider dedicated purchasing software when:
- More than a handful of people can place orders and you need approvals routed automatically.
- You want to see committed spend (open POs) alongside actual spend, so that a budget is not blown by orders that have been placed but not yet invoiced.
- You receive dozens of invoices a month and manual three-way matching is falling behind.
- Suppliers need to acknowledge orders and update delivery dates in a portal rather than by email.
Open POs also matter at period end. On accrual-basis books, goods received but not yet invoiced are a liability that belongs on your balance sheet; a PO log makes that figure quick to find rather than a guess. The template itself does not keep that log: it produces one PO at a time.