Purchase Order
A formal written document issued by a buyer to a supplier authorizing the purchase of specific goods or services at an agreed price. Creates a binding agreement once accepted and locks the supplier price for the order.
A purchase order (PO) is a formal document issued by a buyer to a supplier, authorizing the purchase of specified goods or services at an agreed price. It sets out exactly what is being ordered, in what quantity, at what agreed price, and by when delivery is expected. Once a supplier accepts a purchase order, it becomes a binding agreement - the supplier commits to the stated delivery, and the buyer commits to the agreed price. Purchase orders form the foundation of cost control, price protection, and procurement audit trails in any project-based business.
What a Purchase Order Must Contain
A PO is only as useful as the detail it includes. The essential elements are:
- A unique PO number, referenced on all related delivery notes and supplier invoices
- Full supplier name and billing details
- An itemized description of each product or material, with product codes or specification references where applicable
- Quantity ordered
- Agreed unit price and order total
- Required delivery date and delivery address
- Payment terms
For project-based businesses - construction, AV, promotional merchandise, office furniture, and electrical - the PO should also reference the specific job it belongs to. A job-linked PO ensures that when the supplier invoice arrives, the cost is attributed to the correct project and captured in the job margin calculation. A PO raised without a job reference typically ends up in overhead, reducing profitability without being visible at the project level.
Purchase Orders and Price Protection
Once a supplier accepts a PO, the price is locked. A supplier announcing a price increase after acceptance applies that increase to future orders, not to goods already on an open PO. This protection disappears entirely when orders are placed verbally or by informal email, because no agreed price exists on record.
Three-way matching - comparing the purchase order, the delivery note, and the supplier invoice before approving payment - is the standard control for catching discrepancies. If a supplier delivers 90 units against a PO for 100, or invoices at a higher price than the PO states, the three-way match identifies the variance before any payment is approved.
Verbal orders carry no price protection
Placing an order by phone or informal email without issuing a PO leaves the agreed price unconfirmed. If supplier costs change between the order and the invoice, there is no written agreement to reference. Issue a PO before confirming any order with a supplier.
In Zigaflow, purchase orders link to jobs, works orders, and delivery notes. When a supplier invoice arrives, it can be matched against the open PO and the delivery note before being approved for payment - maintaining a complete cost audit trail per job.
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