Purchase Order Software Definition

A purchase order (PO) is a commercial document and first official offer issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. It is used to control the purchasing of products and services from external suppliers. A PO is generated internally within a company based on a request for goods or services. The request is made via a requisition form, which transfers into the purchase order once approved.

The main purpose of a purchase order is to serve as an agreement between the buyer and seller that goods or services have been ordered, and at what price. This way, both parties have documentation of what was purchased, when it was purchased, and how much it will cost. This can help avoid disputes down the road if there are any discrepancies with what was delivered versus what was actually ordered.

Additionally, purchase orders can be helpful for budgeting purposes. By having all planned purchases laid out in one place (including quantity, price, etc.), it can be easier to track spending and ensure that you are staying within your budget.