What Is a Purchase Order Number?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum
A purchase order number is an alphanumeric code that is assigned to a request to buy something.
A purchase order number is an alphanumeric code that is assigned to a request to buy something.

A purchase order (PO) number is an alphanumeric code that is assigned to a particular request to buy something. Most often, PO numbers are used internally by businesses to track their own purchases. Some companies, however, will assign codes to all of their sales and will give PO numbers to their customers so the customers can track their orders. These codes can be in any alphanumeric format, and many companies will use specific letters or numbers to indicate certain things about the order, such as what is being sold, the location, the buyer and the date.

Use Within Companies

Many businesses use purchase order numbers to keep track of their own purchases.
Many businesses use purchase order numbers to keep track of their own purchases.

In many companies, a purchase order number is assigned after an employee or a department submits a request for the order of certain goods or services. The request usually is formally submitted to a purchasing agent using what is known as a requisition form. If the request is approved, a purchase order is created and is assigned a purchase order number. At that point, the order is placed with another company, which often records the buyer's PO number for inclusion on the order detail.

Purchase order numbers are often used to track spending and sort deliveries.
Purchase order numbers are often used to track spending and sort deliveries.

As the vendor prepares a shipping or packing list to go with the customer’s order, the PO number typically is included on the detail. This makes it possible for the buyer's receiving agent to verify the quantity and type of goods delivered and to confirm that the shipment is associated with a properly authorized order. The purchase order number also appears on the invoice and any other paperwork that the vendor gives to the customer. From this perspective, the PO number expedites the scheduling of payment to the vendor, and it allows the goods to be routed to the proper department.

Purchase order numbers can help warehouse personnel efficiently fill out order requests.
Purchase order numbers can help warehouse personnel efficiently fill out order requests.

The PO number also makes it possible for the company to apply the cost to the budget of the department that placed the order. It also provides the accounts payable department with verification that the expense is legitimate. Payment can then be rendered to the vendor.

Format

The exact construction and length of a purchase order number will vary from one company to another. Many businesses that operate at multiple sites will use the first few characters of the code to identify the location that placed the order, such as "CHI" to represent a facility in Chicago. The next few characters might identify the specific department that placed the order, such as "RD" to represent the research and development department. Thus, the PO number for an order placed by a company's research and development department in Chicago might begin with "CHIRD," followed by other alphanumeric characters that provide more information about the order.

Companies usually structure their PO numbers in whatever manner works best with their internal tracking systems. Some also make use of dashes or spaces, which can help when only certain characters within a PO number need to be read for a specific purpose. In response to the wide variety of lengths and formats that can be used, many vendors configure the fields in their order tracking databases to allow any number of characters — even 30 or more — to be used in a purchase order number.

How To Create a Purchase Order Number

Companies may create a PO number in different manners. Some establishments may choose to do it manually, while others may rely on computer-generated software to provide the information. Management must look at several factors to determine which method to use, carefully considering funding, time, and interest.

For instance, a smaller company may create a manual purchase order because they have fewer clients and more opportunities to fill out forms without interference. This option reduces expenses but increases workload.

Use a standard purchase form, placing the PO at the top for reference. Decide on a series of letters, numbers, and symbols that work for the business operations and awareness. This number should assist workers and account offices in tracking orders and supplies. Therefore, make the arrangement logical and realistic. 

Staff members creating these forms should understand the sequence and list numbers that should follow each other. Remain organized and clearly communicate with one another. If one order takes PO 5434-0001, the next purchase might have PO 5434-0002.

Larger, busier establishments may accept purchases often and with multiple salesclerks working on order forms at one time. In this scenario, manual PO remains difficult. These companies might consider moving to software programs that generate the numbers. This technology is often operated on a cloud-based system and removes the time and hassle of making and following personal PO numbers.

What Is a Purchase Order Number Used for

There are many benefits to using a PO number, particularly to sellers. The system provides a means of remaining organized and aware while also bolstering communication with the buyer. While some purchases may take little time, larger orders may require additional resources and time. Both ends want to remain professional and up-to-date on the order's progress during that lag period.

The PO number offers a method to follow the purchase through each step, ensuring that it occurs smoothly and correctly. For example, companies may go through multiple stages during the ordering process, such as gathering materials, boxing, and shipping. In addition, if a buyer wants to follow up on an order, the team may use the PO number to quickly locate the correct order and provide the interested party with the information they desire.

Furthermore, the purchase order itself is a legally binding document. It helps guarantee payment for services or goods. The number allows administrative members to identify bills due and quickly follow up on the financial obligation. During tax season, the number may also assist with audits and validation of the yearly sales.

In addition, owners may rely on the purchase order number to evaluate the current stock, tracking each request and how much is expected to leave the system. If significant orders occur, the purchase order and number allow team members to see if they need to replace items.

How Is a Purchase Order Number Different From an Invoice Number

The purchase order number happens before the invoice. Businesses create it when someone requests products, using the PO to signify the request and follow it throughout the process. The form specifies what items should be gathered and delivered to complete the sale. This number is helpful during the gathering and shipping phase.

Companies provide an invoice number once the product arrives at the destination. In that paperwork, management finds the amount owed for the delivered goods. In addition, the invoice form notes how much the group owes the original seller.

If a tile company accepts a request for 40 boxes of a particular product, the salesperson begins a PO form with a purchase number near the top. Both the seller and buyer receive a copy. If both parties agree to the number, that document confirms an agreement for purchase. The seller puts the purchase order through, requesting employees put together the desired material and deliver it to the other vendor. 

The seller may ask for progress checks using the PO number during the above time. The seller meanwhile follows the trail to ensure it happens efficiently. The purchase order ends when the delivery occurs, and the invoice becomes essential. The buyer now has the goods and must pay the seller for the work.

Essentially, the two numbers work together to allow for both sides to understand the general progress and secure the agreement between the two places. One is before, and the other occurs after. Expect to see the PO number on the invoice so that everything remains tied together for clarity and accounting purposes.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Discussion Comments

anon342333

Are there any free software programs available for online billing?

burcidi

@ysmina-- My brother started an online store and he took care of those things with an invoicing software. You can purchase an order system or software that basically does everything for you. I think you just have to input the information.

A purchase order form will firstly have the official logo of your company like the date and customer number. It will have both the buyer's and vendor's name, address and contact information. The products which were purchased are listed on the form with price and total cost. Some order forms also have the shipping information. You can alter it to include any other information you want on there. You can also purchase order books which have purchase order examples and invoice samples for reference.

ysmina

If a new home based company is getting started, how should it take care of its transactions, invoices and sales? What kind of information should there be on a purchase order form?

bear78

Purchase order numbers are also associated with sales made through websites of online stores. Once you complete the transaction, they will give you a purchase order number. It's important to note this down because you might need it in the future. The purchase order number might be used to track the shipping of items although companies usually email a separate code or number for shipping purposes.

The purchase order number will also be on the sales invoice of items you receive through the mail. If there is something wrong with a purchase and you need to return or exchange it, the company will require the purchase order number. This number is included when items are mailed back for a refund.

I usually jot down the number on a piece of paper when I complete an online purchase. I also keep an eye out for any emails from the company with the purchase order number so that I have that information safe just in case something goes wrong.

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    • A purchase order number is an alphanumeric code that is assigned to a request to buy something.
      By: Dana Heinemann
      A purchase order number is an alphanumeric code that is assigned to a request to buy something.
    • Many businesses use purchase order numbers to keep track of their own purchases.
      By: Aramanda
      Many businesses use purchase order numbers to keep track of their own purchases.
    • Purchase order numbers are often used to track spending and sort deliveries.
      By: Tyler Olson
      Purchase order numbers are often used to track spending and sort deliveries.
    • Purchase order numbers can help warehouse personnel efficiently fill out order requests.
      By: evok20
      Purchase order numbers can help warehouse personnel efficiently fill out order requests.