Purchase order
A purchase order is a formal order you send to a supplier when purchasing goods, materials, or services. It specifies what's being ordered, in what quantities, at what price, and under what terms – and it serves as the basis for inventory management, delivery tracking, and invoicing. The more open purchase orders you have, the more important it becomes to track their status and follow up on deliveries.
What should a purchase order include?
A purchase order typically specifies which goods or services are being ordered, in what quantity, at what price, and by what delivery date. It also usually includes an order number, which lets you track the order through the whole process – from order confirmation to goods receipt and invoicing.
The supplier's minimum order quantity (MOQ) can also affect how much gets ordered. If the supplier requires a larger order than the company actually needs, it can lead to extra inventory and more capital tied up in inventory.
What's the difference between a purchase order, an order confirmation, and an invoice?
The three documents are connected, but each does a different job. The purchase order is your formal order to the supplier – specifying what you want delivered. The order confirmation is the supplier's reply: confirming the order has been received, and usually the price and delivery date too. The invoice is the supplier's request for payment under the agreed terms.
Comparing the three documents can reveal discrepancies in price, quantity, or delivery terms.
What happens when a delivery doesn't match the purchase order?
Even small discrepancies can have big consequences. If a critical component arrives late, in the wrong quantity, or under the wrong item number, it can disrupt production, customer orders, and inventory planning for weeks.
The more open purchase orders, suppliers, and long lead times a company has to manage, the more important it becomes to track whether deliveries match what was ordered. This makes it easier to spot delays early, before they disrupt planning across the rest of the supply chain.