How To Create A Purchase Order

Jump to Section

Need help with a Purchase Order?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

You can let your supplier know your intention to buy their goods using a purchase order. Purchase orders also significantly help organizations and businesses control their spending, streamlining how they acquire goods and services, ultimately enhancing their gross profit.

Every business must know how to create a purchase order, including how it works and the various types of purchase orders they can explore. Thankfully, you can learn all of these in this article.

Let’s get straight into purchase orders.

What Is a Purchase Order?

A purchase order is a legal document buyers send to their vendors or suppliers for purchase authorization. Otherwise regarded as PO, this type of document outlines your purchase needs and the quantity of goods or services you would want your supplier or vendor to deliver. Businesses often use purchase orders for formal purchase transactions documentation and monitoring stock levels.

Purchase orders have multiple benefits for businesses. One benefit is the involvement of purchase orders in record keeping. Therefore, not knowing how to create one may be detrimental and costly to your business.

Purchase orders often have numbers called purchase order numbers (PO numbers). A PO number is typically listed on delivery notes and invoices, helping businesses track what they've bought.

Similarly, while helping buyers keep a record, purchase orders also help suppliers or vendors minimize their supply errors, receive accurate and prompt payments from their buyers, and maintain detailed and accurate records for financial statements. In essence, purchase orders create a win-win situation for both buyers and suppliers.

Since purchase orders are binding contracts , these legal documents can benefit your business in the following situations:

  • It helps you to keep track of large order requests.
  • It enables you to track payments to various vendors.
  • This document also helps in record-keeping for auditing purposes.
  • You can also use a purchase order to specify the transaction terms between you and your supplier or vendor.

Here is an article to learn more about purchase orders.

How Purchase Order Works

Having understood what a purchase order means and the various benefits it offers, let’s now understand how the document works.

Below are the stages involved in implementing a purchase order – i.e., how a purchase order works:

Stage 1: Buyer decides to order products from vendor

The first stage is identifying a need in your business and the corresponding product you need. The business, in this case the buyer, decides to order products from a seller, vendor, or supplier. The order includes the quantity of product required, and when they may need the products again.

Stage 2: The buyer creates a purchase order and sends it to the vendor for approval.

After deciding to order items from your vendor, the next phase of purchase order implementation is drafting and sending it to the vendor for approval.

Ideally, the purchase order sent by the buyer should include the product(s) needed, quantity, delivery date, and other details.

Stage 3: The vendor reviews the purchase order and offers feedback.

In this stage, the vendor or supplier reviews the purchase order you've sent and gives you feedback on whether they can fulfil the order within the desired timeframe. The vendor would check their inventory to confirm product availability, price, and other essential elements. The approval process should be quick to ensure the product is delivered in a timely fashion, or otherwise let you know they cannot fulfil the order so you can find another vendor.

If they can deliver as required, the seller is expected to approve the purchase order and sends it back to the buyer for confirmation. Such approval makes the document legally binding.

Stage 4: Fulfilment of product or service.

After approval, the vendor or supplier should provide the product or service based on their agreement. This stage also includes generating an invoice to the buyer, stating the product's amount or service charge as indicated on the already approved purchase order. The invoice should also reference the PO number for good accounting.

Stage 5: Payment of invoice.

This is typically the final stage of the purchase order or business transaction . Here, the buyer – you – need to pay the amount stated in the invoice sent by the supplier or vendor.

Stage one (1) to stage five (5), as outlined above, illustrates the general way purchase order works. Of course, there might be slight modifications, depending on the type of transaction, type of purchase order, etc.

Here is an article about how purchase orders work.

Meet some lawyers on our platform

Terence B.

25 projects on CC
View Profile

Don G.

15 projects on CC
View Profile

Michael B.

2 projects on CC
View Profile

Jeremiah C.

11 projects on CC
View Profile

Types of Purchase Orders

Now that you know how purchase order works, next is understanding the different types of purchase orders available.

While all purchase orders aren’t created equally, there are just four (4) types of purchase orders . The major differentiating factor between each of them is the extent of information included in each. Types of the purchase order are:

  1. Standard Purchase Order : This is the most commonly used type of purchase order. It specifies the basic information, including the item you are buying, the quantity to be delivered, delivery schedule, payment terms, etc.
  2. Planned Purchase Order : Planned purchase orders are legal documents requesting the purchase of items in advance. Often, this type of purchase order contains estimated quantities and delivery schedules. It is particularly beneficial to suppliers as it helps them plan accordingly, ensuring they meet your needs.
  3. Blanket Purchase Order : This is basically a commitment kind of purchase order. It makes you promise your vendor to spend a certain amount over a period of time. A business essentially commits itself to buy products up to a particular budget.
  4. Contract Purchase Order : Contract purchase orders specify the terms of an upcoming purchase order before its completion. Buyers often use this type of purchase order for expensive or large orders. Contract purchase orders offer a higher level of legal protection to both the buyer and vendor or seller.

Here is an article about the types of purchase orders.

How To Create a Purchase Order – Step by Step

Below is the step-by-step process to create a purchase order for your next business purchase:

Step 1: Create a Header.

This is the first step when creating a purchase order. Every purchase order must have a header specifying information, such as your business name and address, the purchase order date, order number, etc.

Step 2: Specify the Supplier’s Information.

After the header, carefully indicate the information of the supplier to receive the purchase order. Information required includes the name and address of the supplier's company, your specific contact name, etc.

Step 3: Specify the Shipping Location.

Here, you specify the destination of the order, how the order should be shipped, plus the terms of shipping. You may also include the delivery date, especially for standard purchase orders.

Step 4: Provide Order Details

You can include more than one product in a purchase order. In such a case, ensure you provide the details of each product, including the product code, name, description, quantity required, price per unit, etc. You may include the delivery date of each product if you want them delivered separately.

Step 5: Order Summary.

Finally, summarize your order. This includes the subtotal of every intended purchase. This should also include any applicable discounts, shipping costs, taxes, and the grand total.

Here is an article about how to create a purchase order.

What’s Typically Included in a Purchase Order?

Below is information generally included in a purchase order, regardless of type. Familiarizing yourself with these included details is an excellent way to learn how to create a purchase order!

  • Supplier, vendor, or seller’s information.
  • Buyer information.
  • Purchase order number.
  • Order date.
  • Product or service description.
  • Billing address.
  • Shipping address and date of scheduled delivery.
  • Buyer and supplier signature.

Get Help with a Purchase Order

Do you need help creating your first purchase order? Post a project in ContractsCounsel’s marketplace to receive bids from business lawyers that routinely work on business transactions. All lawyers have been vetted by our team and are peer reviewed by our customers for you to explore before hiring.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

ContractsCounsel verified
Outside Counsel
26 years practicing
Free Consultation

I'm a business law generalist with over 24 years of experience, including as in-house General Counsel, as outside counsel through my own firm and as an attorney in an Am Law 100 law firm. My employers and clients uniformly appreciate my ability to (i) negotiate and close transactions quickly and effectively, and (ii) to make the complex simple. Among other things, I can efficiently assist you on entity formation, governance, and structure; HR issues; mergers and acquisitions; and the negotiation and drafting of all types of commercial contracts. I'm the proud recipient of multiple Martindale-Hubbell Client Distinction Awards given only to the top 5% of attorneys for quality of service.

ContractsCounsel verified
Business Attorney
14 years practicing
Free Consultation

Strategic thinking business minded Outside General Counsel here to help you with your company. I have been able to help guide business owners from startup through series A, B, & C funding and ultimately IPO's. Regardless of your plans I am here to help you succeed as you grow your business.

ContractsCounsel verified
Principal Attorney
17 years practicing
Free Consultation

Daliah Saper operates a cutting-edge internet and social media law practice that regularly leads local and national media outlets to solicit her commentary on emerging internet law issues involving cyberbullying, sexting, catfishing, revenge porn, anonymous online defamation, domain name and user-name squatting, privacy, and the latest business decisions made by social media platforms such as Facebook, Twitter and YouTube. As a litigator Daliah represents companies bringing or defending business and intellectual property disputes. (She has argued cases in a number of jurisdictions including taking a case all the way to the Illinois Supreme Court.) As a transactional lawyer she helps clients choose the right business entity, drafts contracts and licensing agreements, advises on sweepstakes and contest rules, and ensures website terms of use and privacy policies are compliant, and provides comprehensive trademark and copyright counseling. Since founding Saper Law Offices in 2005, Daliah has been named a 40 Under 40 by Law Bulletin Publishing Co., a top Media & Advertising attorney by Super Lawyers Magazine 14 years in a row, and has been repeatedly recognized as a leading media and entertainment lawyer by Chambers and Partners. For the past eleven years, she also has taught entertainment and social media law at Loyola University Chicago School of Law.

ContractsCounsel verified
10 years practicing
Free Consultation

Mr. Mehdipour attended the University of California San Diego where he received his degree in political science. After graduating from UCSD, Mr. Mehdipour attended Southwestern University School of Law where he received his JD. Upon passing the bar, Mr. Mehdipour gained invaluable experience both in a law firm and business setting. Mr. Mehdipour uses his prior business and legal experiences to negotiate the most advantageous results for his clients.

ContractsCounsel verified
14 years practicing
Free Consultation

Alen Aydinian is a versatile attorney with over a decade of experience working with business owners and real estate professionals. Client engagement is central to a successful attorney/client relationship. Alen personally manages all client relationships so that his clients can see how their interests are being served at every stage of the process.

ContractsCounsel verified
Founder, Victrix Legal LLC
1 year practicing
Free Consultation

I help small business owners build and protect their dreams. I always thought that I would just be a litigator. Then I joined an intellectual property clinic in law school. We were helping nonprofits and small businesses reach their goals. I fell in love with the work and decided to open my own firm so I could keep helping them. When I decided to start Victrix Legal, I decided that it would be a modern law firm designed to serve professionals. It would be different from every other law firm. In my experience, my law firms are designed to promote inefficiency and reactionary lawyering. Because in most firms, you make more money when you spend more time on a project. And you lose money if your client doesn't get sued. In my opinion, that's a built-in conflict of interest. My firm is different. I use flat fees for most basic projects to keep costs predictable for you and incentivize efficiency. I offer long-term advisory plans and legal audits to prevent issues from happening. I want my clients to see me as their business partner, not just the guy they call when they are in trouble. If any of that interests you, please reach out to me. I offer free consultations. Let's set aside some time and talk about what your legal needs are.

ContractsCounsel verified
7 years practicing
Free Consultation

My clients know me as more than just an attorney. First and foremost, my background is much broader than that. Prior to attending the Valparaiso University School of Law, I earned a Master of Business Administration and ran a small business as a certified public accountant. Thanks to this experience, I possess unique insight which in turn allows me to better assist my clients with a wide range of business and tax matters today. In total, I have over 20 years of experience in financial management, tax law, and business consulting, and I’m proud to say that I’m utilizing the knowledge I’ve gained to assist the community of Round Rock in a variety of ways. In my current practice, I provide counsel to small to medium-sized businesses, nonprofit organizations, and everyday individuals. Though my primary areas of practice are estate planning, elder law, business consulting, and tax planning, I pride myself on assisting my clients in a comprehensive manner. Whenever I take on a new client, I make an effort to get to know them on a personal level. This, of course, begins with listening. It is important that I fully understand their vision so I can help them successfully translate it into a concrete plan of action that meets their goals and expectations. I appreciate the individual attributes of each client and know firsthand that thoughtful, creative, and customized planning can maximize both financial security and personal happiness. During my time as a certified public accountant, I cultivated an invaluable skill set. After all, while my legal education has given me a deep understanding of tax law, I would not be the tax attorney I am today without my background in accounting. Due to my far-reaching experience, I am competent in unraveling even the most complex tax mysteries and disputes. My CPA training benefits my estate planning practice, too. In the process of drafting comprehensive wills and trusts, I carefully account for every asset and plan for any tax burdens that may arise, often facilitating a much smoother inheritance for the heirs of my clients. Prior to becoming certified as a CPA, I made sure to establish a solid foundation in business both in and out of the classroom, and the acumen I’ve attained has served me well. Not only am I better able to run my own practice than I otherwise would be; I am able to help other small business owners fulfill their dreams, as well.

ContractsCounsel verified
5 years practicing
Free Consultation

Hello! I am a young attorney with four years' experience in real estate transactions, fund formation, and general corporate transactional work. I graduated in 2016 from the University of Texas - Austin and I am barred in Texas.

ContractsCounsel verified
5 years practicing
Free Consultation

I graduated from Harvard Law School and worked first for a federal judge and then a leading DC firm before starting a firm with a law school classmate. My practice focuses on company formations, early-stage investments, and mergers & acquisitions.

ContractsCounsel verified
27 years practicing
Free Consultation

After 21 years as an in-house attorney for both large and small organizations, I formed Osensky Law in 2017 to bring my unique in-house counsel insights to entrepreneurs and smaller businesses. Unlike a traditional law firm, my focus is on delivering the kind of legal support a business wants and needs - not just technically correct legal advice, but strategic problem-solving with a focus on providing business value to clients. Since earning my law degree with honors from Tulane University Law School, I worked as in-house counsel for large multinational companies such as Georgia-Pacific and MCI, as well as smaller organizations including Georgia Technology Authority and Georgia Tech. This unique combination of experience allows me to bring together the best practices of all of them. I have led multi-disciplinary teams to achieve important business goals and have successfully negotiated many multi-million dollar deals. Now, as a business owner myself, I can relate to my clients and understand the challenges they face. I have an established reputation for providing practical advice and perspectives based on my legal training combined with over 20 years of practical hands-on experience as a business lawyer and leader. Today, with my firm Osensky Law, I advise clients on starting a new business, buying or selling a small business, and doing business with contracts.

ContractsCounsel verified
10 years practicing
Free Consultation

G'day, my name is Michele! I work with startups, entrepreneurs and small/medium-sized businesses across the country in a wide array of industries. I help them with all of their ongoing, daily legal needs. This includes entity formation, M&A, contract drafting and review, employment, asset sale & acquisition, and business sales or shareholder exits. I'm half-Australian, half-Italian, and I've lived the last 20+ years of my life in America. I've lived all over the USA, completing high school in the deep south, graduating cum laude from Washington University in St. Louis, and then cum laude from Georgetown University Law Center. After law school I worked for the Los Angeles office of Latham & Watkins, LLP. After four intense and rewarding years there, I left to become General Counsel and VP of an incredible, industry-changing start-up called Urban Mining Company (UMC) that manufactures rare earth permanent magnets. I now work for Phocus Law where I help run our practice focused on entrepreneurs, startups, and SMEs. I love what I do, and I'd love to be of help! My focus is on providing stress-free, enjoyable, and high-quality legal service to all of my clients. Being a good lawyer isn't enough: the client experience should also be great. But work isn't everything, and I love my free time. I've been an avid traveler since my parents put me on a plane to Italy at 9-months old. I'm also a music nut, and am still looking for that perfect client that will engage me to explain why Dark Side Of The Moon is the greatest album of all time. Having grown up in a remote, and gorgeous corner of Australia, I feel a strong connection to nature, and love being in the elements.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call