Purchase Order: Definition, What's Included, Types
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What Is a Purchase Order?
A purchase order (PO) is a document a buyer sends to a seller requesting particular products or services. The purchase order is a legally binding contract that indicates a buyer's intention to pay for the listed items at the specified price. This agreement protects the seller in the event of nonpayment. The seller can produce the purchase order as proof of the request and agreed-upon total.
If you're a buyer, you should request a purchase order confirmation for each order that you submit. This confirmation indicates that the seller has received and accepted the order. The purchase order confirmation gives the buyer protection if the seller fails to produce the items as ordered or charges a different sum than what's included on the PO.
What's Included on a Purchase Order?
A purchase order includes important details regarding the products or services that have been requested. At a minimum, a purchase order will include the following:
- Header with your company's name and address
- The date of the order
- A tracking number
- The seller's name and address
- Item type
- Product number, model number, or SKU
- Item quantity
- Item price
- Requested delivery date for the order
- Billing address
- Shipping address
- Subtotal including taxes, shipping costs, discounts, and other adjustments
- Payment terms (such as due upon delivery or within 30 days)
Your purchase order may also include other details as needed.
Types of Purchase Orders
To manage transactions, you might use one of the following four types of purchase orders, a key part of setting up your business .
- Standard Purchase Orders : These orders are the most common choice, specifying the basic information detailed above.
- Planned Purchase Orders : A planned purchase order places a request for items in advance. You may use an estimated quantity and range of delivery dates for a planned purchase order, exchanging more detailed information closer to the delivery date. If you purchase a large number of items routinely, planned purchase orders will help vendors plan accordingly so they can meet your needs.
- Blanket Purchase Order : A blanket purchase order indicates a commitment to buy a number of items up to a particular value. Buyers guarantee that they will spend a set amount with the seller.
- Contract Purchase Order : A contract purchase order details the terms of an upcoming PO before the purchase order itself is complete. A contract PO is usually used for large or expensive orders where the buyer and seller want more legal protection in the exchange.
Uses for a Purchase Order
Purchase orders do more than simply initiate a transaction. They provide valuable documentation for tracking and logging a transaction as well. You may refer to your purchase orders in the future for the following:
- Completing audits
- Preparing financial statements
- Tracking orders and avoiding duplicate orders
- Preparing budgets
Image via Flickr by USDAgov
How to Submit a Purchase Order
To complete a purchase order successfully, follow the steps below.
- Identify what you want to buy . Determine which items you need to purchase from the seller and in what quantity. This determination is often done via a purchase requisition form which is completed by management and sent to the purchasing department.
- Determine when you need your products . Evaluate your business practices to determine exactly when you need your purchase order fulfilled.
- Draft a purchase order . Include a clear description of each item, the item's identification number where applicable, the quantity, and the price. For clarity, you should include both the price per item and the total price based upon the number of each item that you will buy. At the bottom of the purchase order, you will include a total for all the products on the PO.
- Submit the PO to the seller . Send your sales representative or other point of contact the completed purchase order with all the items you need as well as the date by which you need them.
- Wait for a confirmation of the purchase order . If you do not receive a confirmation, contact the company to inquire about the status of your submission.
- Await fulfillment and invoicing . You will receive an invoice from the seller detailing the total for your order and the timeline for payment. If you paid upfront, you should receive an invoice indicating no outstanding balance.
- Pay for the products . If you have an outstanding balance for your order, make sure to pay the invoice per the terms set forth by the seller to complete the fulfillment process for your purchase order.
Other Documents Related to Purchase Orders
The purchase order is only one in a series of documents exchanged as this type of business transaction is completed. Other important documents involved in the purchase include the following:
- Purchase Order Confirmation : The purchase order confirmation proves receipt of the purchase order by the seller. If a buyer doesn't receive a purchase order confirmation, the buyer should contact the seller to determine whether the purchase order was received or lost.
- Invoice : The invoice either requests or confirms payment for the order. An invoice includes much of the same information as the purchase order, with fewer details. If payment was not made with the initial purchase order, the invoice will specify when payment is due.
- Packing Slip : The packing slip is a document included with delivery of the order. The packing slip should match the item description and quantity as specified on the purchase order as well as the invoice.
Confirming the completion of a successful purchase requires all of the above documents. By using three-way matching with the purchase order, invoice, and packing slip, companies can ensure that every step was handled properly.
Limitations of Purchase Orders
Purchase orders are effective for purchases that have a predetermined price and quantity. You cannot use a purchase order for every expense within a business. Some items that you cannot track by using a purchase order include the following:
- Recurring bills : Your electricity, gas, water, or rent cannot be detailed on a purchase order. Rather than billing a vendor for these expenses, a supplier will bill you.
- Monthly subscriptions : Subscriptions may be billed monthly or annually, but they are not handled with a purchase order. A supplier will submit a bill to you on a regular basis.
- Services with Varying Costs : Financial, marketing, advertising, and legal services don't typically have a predetermined cost. You are billed for these services upon completion of the job and do not create a PO for them in advance.
- Internal Expenses : Internal purchases for which employees are reimbursed are handled with a reimbursement request. The employee does not submit a purchase order for expenses such as office supplies or business travel.
Best Practices for Purchase Orders
Make sure you're using purchase orders in the most efficient way with the following best practices:
- Clearly define who is responsible for handling purchase orders within the company. Do not allow employees to submit POs as needed, since this practice might result in duplicate orders.
- Include terms and conditions with your POs that specify how to handle the purchase order and define each party's responsibilities.
- Use an electronic system to manage purchase orders. This system eliminates unnecessary paperwork and allows you to more easily track your orders.
Purchase orders will help you handle essential transactions for your business as easily as possible by keeping them well-organized and easily referenced.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Meet some of our Purchase Order Lawyers
Daehoon P.
Daehoon P.
Corporate, M&A & Securities Lawyer | Managing Attorney, DP Counsel PLLC Practice Areas: Business Formation | Commercial Contracts | Contract Drafting & Review | Mergers & Acquisitions | Venture Capital | Securities Offerings | Franchise Law | Employment & Equity Compensation | Intellectual Property | Cross-Border Transactions About/Bio: I represent companies, investors, and fund sponsors in corporate transactions, commercial contracting, and private securities matters, from entity formation and early-stage financings to acquisitions, exits, and ongoing strategic counsel. As Managing Attorney of DP Counsel PLLC, I help clients structure transactions clearly, allocate risk thoughtfully, and move deals forward with documentation that is practical, enforceable, and aligned with business objectives. My practice includes both day-to-day commercial matters and more complex transactional work, including venture financings, private offerings, M&A deals, fund-related documents, and cross-border structuring. What I Do: Corporate & Commercial • Entity formation and structuring for corporations, LLCs, and limited partnerships • Operating agreements, shareholder agreements, and governance documents • Commercial contract drafting, review, and negotiation • Vendor, distribution, manufacturing, SaaS, and licensing agreements • Employment, consulting, confidentiality, and equity compensation agreements • Outside general counsel support for growing companies Securities & Private Capital • Private offerings under Regulation D and Regulation S • Private placement memoranda, subscription agreements, and investor documents • SAFE, convertible note, and priced equity financings • Venture capital and private fund formation matters • Fund governing documents and offering document packages • Securities law analysis for private capital raising transactions Mergers & Acquisitions • Letters of intent and term sheets • Stock purchase, asset purchase, and merger agreements • Due diligence coordination and transaction support • Disclosure schedules, closing documents, and post-closing matters • Earnouts, rollover equity, indemnity structures, and related deal terms • HSR, CFIUS, and related regulatory issue spotting for qualifying transactions Digital Assets & Emerging Technologies • Federal-law digital asset and token securities analysis • Entity structuring for blockchain and Web3 ventures • Digital asset fund and operating structures • AML/KYC documentation support and regulatory issue spotting Franchising • Franchise Disclosure Documents (FDDs) • Franchise agreements • Master franchise and area development agreements • Franchise structuring and registration coordination Real Estate Transactions • Commercial real estate acquisitions and dispositions • Real estate joint ventures and syndications • Commercial lease drafting and negotiation • Real estate investment structures and related offering documents Cross-Border & International • U.S. market entry and entity structuring for international clients • Delaware and multi-entity holding structures • Cross-border transaction planning and documentation • Coordination with foreign counsel and tax advisors on cross-border matters Why Clients Hire Me: • Big-law-level drafting with boutique responsiveness • Practical, business-focused advice grounded in execution reality • Clear scoping and transparent fee arrangements • Experience across financings, acquisitions, fund formations, and cross-border transactions Typical Projects: • Contract drafting and negotiation • Entity formation and governance packages • Private offering document suites • Venture financing documentation • M&A transactions from LOI through closing • Fractional or outside general counsel support Industries Technology | SaaS | FinTech | Digital Assets | E-commerce | Healthcare | Real Estate | Food & Beverage | Professional Services
"Working with Daehoon was a wonderful experience! As someone establishing a new audiobook narration business, I wanted to be confident that my contracts were carefully written and addressed the unique needs of my work, particularly the important issue of AI voice protection. Daehoon was patient, professional, and attentive to my questions and concerns. I especially appreciated his willingness to work through revisions with me and make sure the final documents reflected what I needed. Throughout the process, I felt that he genuinely cared about doing a good job. His attention to detail and thoughtful approach gave me confidence and peace of mind as I move forward with my business. I’m very grateful for his help and would happily work with him again. Thank you, Daehoon!"
Jason H.
Jason has been providing legal insight and business expertise since 2001. He is admitted to both the Virginia Bar and the Texas State Bar, and also proud of his membership to the Fellowship of Ministers and Churches. Having served many people, companies and organizations with legal and business needs, his peers and clients know him to be a high-performing and skilled attorney who genuinely cares about his clients. In addition to being a trusted legal advisor, he is a keen business advisor for executive leadership and senior leadership teams on corporate legal and regulatory matters. His personal mission is to take a genuine interest in his clients, and serve as a primary resource to them.
"Jason has been excellent on communication with the Cell Tower Company, and getting Us what we have decided to settle on, still under negotiations process. Would highly recommend for any legal needs not just cell tower projects.."
Rene H.
I am an attorney licensed in both California and Mexico. I offer a unique blend of 14 years of legal expertise that bridges the gap between diverse legal landscapes. My background is enriched by significant roles as in-house counsel for global powerhouses such as Anheuser-Busch, Campari Group, and Grupo Lala, alongside contributions to Tier 1 law firms. I specialize in navigating the complexities of two pivotal areas: AI/Tech Innovation: With a profound grasp of both cutting-edge transformer models and foundational machine learning technologies, I am your go-to advisor for integrating these advancements into your business. Whether it's B2B or B2C applications, I ensure that your company harnesses the power of AI in a manner that's not only enterprise-friendly but also fully compliant with regulatory standards. Cross-Border Excellence: My expertise extends beyond borders, with over a decade of experience facilitating cross-border operations for companies in more than 20 countries. I am particularly adept at enhancing US-Mexico operations, ensuring seamless and efficient business transactions across these territories.
"Rene gets the job done in an effective and efficient manner. Rene understood the goals of the project I hired him for; delivered and reached those goals with his knowledge and experience; as well as consistently following up on time, and is pleasant to work with."
Tim E.
I help small businesses, entrepreneurs, and business owners draft, review, and negotiate the agreements behind their operations and transactions. My work includes service agreements and MSAs, LLC operating and shareholder agreements, business purchase documents, commercial leases, independent contractor agreements, and NDAs. My approach is practical: understand what you are trying to accomplish, identify the terms that materially affect the deal, and deliver clear, usable documents without unnecessary complexity. For reviews, I focus on meaningful risks and proposed solutions, with redlines and plain-English explanations. I offer fixed-fee services for defined projects, from a single contract review to a broader business transaction. Each proposal identifies the deliverables, revision scope, and expected turnaround so you know what is included before we begin.
"Excellent experience with Tim on my relatively complex EULA for a suite of network appliance products. Tim was very fair with pricing, responsive, diligent, thorough, technically knowledgeable, took the time to address all my questions and concerns, and finished (with revision) on schedule and budget. Great experience overall and I'll definitely be using Tim for more work in the future with my business. I'll also be using Contract Counsel and recommending it to everyone I know as well! THANK YOU! -Devin"
Michael M.
www.linkedin/in/michaelbmiller I am an experienced contracts professional having practiced nearly 3 decades in the areas of corporate, mergers and acquisitions, technology, start-up, intellectual property, real estate, employment law as well as informal dispute resolution. I enjoy providing a cost effective, high quality, timely solution with patience and empathy regarding client needs. I graduated from NYU Law School and attended Rutgers College and the London School of Economics as an undergraduate. I have worked at top Wall Street firms, top regional firms and have long term experience in my own practice. I would welcome the opportunity to be of service to you as a trusted fiduciary. In 2022 and 2023, I was the top ranked attorney on the Contract Counsel site based upon number of clients, quality of work and number of 5 Star reviews.
"Michael's expertise and judgment impressed me. I brought him in for contract advisory work, and he quickly asked the questions I hadn't considered, identified the risks that mattered, and set aside the ones I had wrongly prioritized. He changed how I understood the contract. He is an excellent advisor - highly recommended."
Rishma E.
Rishma D. Eckert, Esq. is a business law attorney who primarily represents domestic and international companies and entrepreneurs. A native of both Belize and Guyana, she remains engaged with the Caribbean community in South Florida: as a Board Member and General Counsel for the Belize American Chamber of Commerce of Florida, and Member of the Guyanese American Chamber of Commerce. She holds a Bachelor of Laws degree (LL.B.) from the University of Guyana in South America, a Master’s degree in International and Comparative Law (LL.M.) from Stetson University College of Law in Gulfport, Florida, and earned a Juris Doctor degree (J.D.) from St. Thomas University School of Law in Miami, Florida. Licensed to practice in the State of Florida and the Federal Court in the Southern District of Florida, Mrs. Eckert focuses her passion and practice on domestic and international corporate structuring and incorporation, corporate governance, contract negotiation and drafting, and trademark and copyright registrations.
"I loved working with Rishma. She answered all my questions and concerns. I feel at ease setting up my business; I've learned a lot from Risham and value her feedback. I will be definitely be using her again in the near future."
Mark A.
Mark A. Addington focuses his practice primarily on employment litigation, including contractual disputes, restrictive covenants (such as non-competition, non-solicitation, or confidential information restrictions), defense of wage and hour, harassment, retaliatory discharge, disability, age, religion, race, and sex discrimination.
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ContractsCounsel User
Contracts
Purchase Order
California
Contract versus PO?
I'm working with a client who refuses to sign our contract document while mentioning that the PO would suffice for that purpose. I already signed the contract and sent it back to the client that I'm working with, but they didn't sign it so far and refuse to sign it. But according to them, they will send PO. Is the PO legally binding to them to make the payment? Would the PO really suffice against the contract that I signed?
Christopher M.
Annoying as this answer it, it really does depend. Some purchase orders (especially in the government contracting world) automatically become contracts once they are accepted and signed. If this is the other sides normal mode of operating it is not unheard of for them to be reluctant to accept a different contract in case it creates different or conflicting terms. At the end of the day there is nothing inherent in a PO that would mean it cannot serve as a binding contractual document, it just depends on the language in the PO.
Business Contracts
Purchase Order
Texas
Can a purchase order be legally binding without a signed agreement?
I recently entered into a business transaction with a supplier where we discussed the terms and conditions of the purchase verbally, and they sent me a purchase order outlining the specifics of the deal, but we did not sign any formal agreement. Now, they are claiming that the purchase order is binding and are demanding payment, but I am unsure if it holds legal weight without a signed agreement.
Darryl S.
It's not clear from the question if you verbally committed to the order or PO. This is something that you can and should dispute with the supplier. The purchase order may contain the essential elements of a contract: an offer (the specific goods/services), acceptance (your verbal agreement if it was given), consideration (the payment terms), and intent to create legal relations (business context). Contract law generally recognizes that commercial agreements don't always require signatures to be enforceable. If you made a verbal commitment, followed by the written purchase order, this could constitute what's called a "course of dealing" that courts may recognize. That said, the specifics of your situation matter greatly. If you never agreed to the order or the purchase order contains terms that weren't part of your verbal agreement, or if there are significant discrepancies between what was discussed and what's in the document, you have grounds to dispute certain elements.
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