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What is a Purchase Order?

Malcolm Tatum
Updated May 16, 2024
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Purchase orders (POs) are documents of authorization that are issued by a buyer and extended to a seller. Their main function is to specify the terms of purchase that will exist between the two entities, at least in regard to all purchasing activity specified in the document. This form of sales order may be used to authorize a one-time purchase, or provide the means for establishing and governing a series of purchases over an extended period of time, usually one calendar year.

Before a purchase order is produced, many businesses make use of an internal document that is known either as a purchase requisition or simply a requisition. A department or other entity within the company structure submits a request for the purchase of specified goods or services using this document. The requisition usually carries a specific identification number, making it relatively easy for the purchasing department to keep track of whether or not the request has been approved, denied, or is still under consideration.

In the event that the appropriate purchasing agent approves the requisition, a purchase order is issued to determine the terms and conditions under which the purchase is made. This often involves identifying the vendor who will fill the order, the unit price for the goods or services provided, and the total purchase price. Often, vendors include the order number on the invoice for the filled order, making it easy for accounts payable to process the invoice and apply the charges to the department that originally requested the order.

Along with use in evaluating and approving requested purchases on a one-time basis, this document can also be used to authorize several purchases over a specified period of time. This is often referred to as a blanket PO or blanket order. For example, if a department within a given company wished to use audio conferencing over the course of the business year, it would submit a requisition to the purchasing area that covered the number of call minutes needed to successfully hold those conferences for that entire year. The purchasing department then seeks to secure a vendor that will provide the service at a reasonable per minute/per line rate. Once the vendor is identified and approved, the purchasing agent issues an order to that vendor, who in turn tracks the minutes used and makes sure the blanket PO number is referenced on each invoice issued to the customer throughout the year.

While larger corporations more often use both a requisition form and a purchase order to keep track of its ordering activity, smaller companies sometimes combine the two documents, effectively using the same identification number for requesting the purchase of items and approving that request. At times, the decision to use a single document or both documents has to do with complying with governmental regulations as well as maintaining a comprehensive internal history. As long as the documentation used creates a consistent and accurate record of the transactions, and provides the company with the detail it needs, either approach will work.

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Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

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Malcolm Tatum

Malcolm Tatum


Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
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