Purchase Order Templates and Why You Need Them

What Is a Purchase Order (PO)?

A purchase order is a document a buyer sends to a supplier to indicate what products and services they want to purchase. It lists every item, just like a shopping cart, and includes payment and delivery details. Once the supplier agrees with the purchase order, it becomes a legal document that insures the transaction.

How Does a Purchase Order Work?

Once you settle on a supplier or seller, you can create a purchase order form. You may use their list prices or ask for a customized offer (e.g., for large quantities, recurrent purchases, etc.). Here are the steps to follow:

• Create a PO form that lists all the items you need, their prices, payment details, delivery options, and terms and conditions of the transaction.
• Send the PO to the seller.
• Wait for the seller to approve the PO and invoice you for the products and services mentioned in the PO.
• Based on the payment agreement, you can pay the invoice, partially pay it, or wait for the delivery of the goods before paying it.

If you need recurrent transactions with a particular supplier, you can create a purchase order that covers multiple deliveries. For example, you can get one delivery per month and monthly invoicing. The prices may vary according to a previous agreement between the buyer and seller. Still, they may also be fixed for a limited time (aka blanket purchase order) due to a reliable business connection. We’ll get into more detail about different types of PO later on.

Benefits of Using Purchase Orders

Developing good relationships with your suppliers is suitable for your business. It means you can rely on a trustworthy seller to deliver the materials, supplies, and services you need to perform your activity at high standards. However, purchase orders have other benefits you should consider:

• Improved acquisition procedures
• Better budget management and cash flow
• Accurate internal control
• Ordering without immediate payment and guaranteeing the best price
• Transparent business expenses
• Better shipment tracking.

Types of Purchase Orders

Based on your plans for the products and services you purchase and on your relationship with the vendor, purchase orders can be categorized as follows:

• Standard Purchase Order – a complete document for one-time use. Standard POs are usually used for ordering from a vendor you have never worked with and/or don’t plan to work with in the future (e.g., ordering event planning services for a one-time event). They include all the required information, from items purchased and prices to delivery location and date to terms and conditions.
• Blanket Purchase Order – a document for recurring purchases. Blanket POs ensure the seller will deliver the items you need at a specified time. Deliveries may be periodic (e.g., coffee delivery for your office every 15^th of the month) or at request (e.g., office supply delivery when you run out of toner). Usually, the price is fixed.
• Planned Purchase Order – a standard PO that doesn’t specify the delivery information. The products and services specified in the scheduled PO will be delivered later, and the buyer will determine when they need the goods at the location. For example, a small business may use a planned PO to restock irregularly.
• Contract Purchase Order – a document that specifies the terms and conditions for all future purchase orders. Often, the terms and conditions are negotiated and periodically updated. A contract PO doesn’t include quantities or delivery information.

Purchase Order Format

Now that you know why purchase orders are vital for your business and what PO types exist, it’s time to create your purchase order format and use it for all your POs from now on. Here is what information to include in a PO format:

• Header – It includes all business contact information about the buyer. The header also contains a unique purchase order number that helps you quickly identify an order and check its details.
• Seller information – It includes all business contact information about the seller.
• Shipment information – It includes all details about the shipment, such as complete shipment address, delivery date, shipment terms, and contact details of the person receiving the goods.
• Order information – It includes all details about the products and services being ordered, such as quantities, prices, product codes, individual delivery dates if it’s the case, VAT, and so on.
• Total – It includes subtotals, taxes, shipping costs, and the total cost of the order.
• Additional comments – Some POs include an area for special requests or comments.

Purchase Order Templates

If you don’t want to create a purchase order from scratch, download our free purchase order templates and customize them to meet your business's requirements. We provide Microsoft Word and Microsoft Excel templates.

Free Purchase Order Template Word

If you're a fan of Microsoft words, and you want something that you can quickly personalize and send to your vendor of choice, than this is the version you need.

Purchase Order Template Word

Free Purchase Order Template Excel

For Microsoft Excel users, this version might be better suited for you. It has the right format, plently of rows to add the items you want to buy and automated calculations for the procing. What are you waiting for. Get it now.

Purchase Order Template Excel

FAQ

What is the difference between a purchase order and an invoice?

A purchase order is a document created and sent by the buyer at the beginning of the transaction to inform the seller of the products and services ordered. An invoice is created and sent by the seller at the end of the transaction to inform the buyer of the payment details and methods. It is also a financial document that goes to accountancy and is used for tax purposes.