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Glossary

What is a purchase order?

A purchase order is a formal document a buyer sends to a seller listing the items or services, quantities and agreed prices it wants to buy. Once accepted, it becomes a binding agreement.

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How a purchase order works

  • Requisition. an employee requests the purchase and it is approved.
  • Create the order. the buyer issues a purchase order with a unique number, items, quantities, prices, delivery terms and payment terms.
  • Seller responds. the seller accepts or rejects the order.
  • Record. the buyer records the order so it can match the receipt and invoice later.

Benefits

Purchase orders control what is bought from external suppliers. They show commitments before invoices arrive, give suppliers a clear record of what was agreed, and make it possible to match invoices to an order and receipt before payment. They usually live in the enterprise resource planning or purchasing system.

Purchase orders and contracts

Many orders are placed under a master contract that sets prices and terms. The order then refers to the contract, and the invoice should match both. Where the order and contract disagree, the contract wording on which document prevails decides.

How Aavenir handles it

Invoiceflow matches each invoice to the purchase order and receipt, then checks rates, discounts and tax terms against the signed contract in Contractflow. Exceptions go to a person before payment.

Keep reading

Purchase order management Purchase order management is the process, and often the software, for handling purchase orders from creation and approval...Read more Purchase requisition A purchase requisition is an internal request to buy goods or services, approved before a purchase order is raised.Read more Two-way invoice matching Two-way invoice matching compares an invoice with its purchase order to check that quantities, prices and terms agree, and...Read more

Frequently asked questions (FAQ)

Common questions

Is a purchase order a legally binding contract?

Once the seller accepts it, a purchase order usually forms a binding agreement on its terms. If a master contract already exists, the order typically works under it. Read about master service agreements.

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

The buyer sends the purchase order to place an order. The seller sends the invoice to request payment after delivering. The two are matched before payment. Read about two-way invoice matching.

What is a blanket purchase order?

An order covering repeated purchases from one supplier over a period, at agreed prices, with individual releases as goods are needed. It cuts the effort of raising many small orders. Read about blanket purchase orders.

Have a question we have not answered? Ask the Expert

Schedule a demo

See your contracts run on one record.

  • 1 A 30 minute walkthrough Built around your team, whether that is procurement, legal, IT or finance.
  • 2 Your contracts, not ours Bring a few sample agreements and watch Aavenir AI extract and review them.
  • 3 ServiceNow or standalone We show the deployment that fits the systems you already run.

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