A purchase order is a formal request to a vendor to supply certain goods or services. A purchase order is normally initiated by a buyer’s requisition and authorization for the purchase. It becomes a contract when the vendor accepts the terms and conditions set forth in the purchase order.
The purpose of a purchase order is to document the agreement between a buyer and seller and to provide both parties with a legal record of what was ordered, when it was ordered, the quantity of goods or services ordered, the price per unit, the total cost, delivery terms and payment terms. A purchase order serves as an offer from the buyer to the seller. When the seller accepts the terms and conditions of the purchase order, it becomes binding on both parties.
A properly written purchase order should include:
– The name, address and contact information for both the buyer and seller
– A description of the goods or services being purchased
– The quantity of goods or services being purchased
– The price per unit
– The total cost
– Delivery terms
– Payment terms