ToolbeltDocsWhen to use a purchase order
Use a purchase order whenever you want a written record of exactly what you ordered and at what price before the goods arrive. For contractors, that usually means material orders for a job, special-order items that can't be returned, and anything delivered straight to a job site.
A PO also helps when you buy on account: the vendor knows the order is approved, and you can check their invoice against what you actually agreed.
What to include in a purchase order
A purchase order should leave the vendor nothing to guess: who is buying, what exactly, how much of it, at what price, and where and when to deliver.
- PO number and date, plus who placed the order.
- Your business details and the vendor's name and contact.
- Ship-to address, such as the job site, if it differs from your billing address.
- Line items with the vendor's SKU or part number, description, quantity, unit and unit price.
- Subtotal, tax, shipping and total.
- Delivery date and shipping method.
- Payment terms, such as Net 30, prepaid or COD (cash on delivery).
- Job or project name and the vendor's quote number, if they gave you one.
Purchase order example
Example only Here is a filled-in example of a contractor ordering framing materials for a deck job from a lumber yard, delivered to the job site. The prices are made up for illustration only — your vendor's prices will differ.
| Description | Qty | Rate | Amount |
|---|---|---|---|
| 2x10 pressure-treated joist, 12 ft | 14 ea | $28.97 | $405.58 |
| 4x4 pressure-treated post, 8 ft | 6 ea | $16.48 | $98.88 |
| Joist hangers, 2x10 | 28 ea | $2.38 | $66.64 |
| Structural screws, box of 50 | 2 box | $38.50 | $77.00 |
| Concrete mix, 80 lb | 10 bag | $6.25 | $62.50 |
| Delivery charge | 1 ea | $75.00 | $75.00 |
| Subtotal | $785.60 | ||
| Sales tax (0%) | $0.00 | ||
| Total | $785.60 | ||
How to number purchase orders
Give every purchase order a unique number that you never reuse. The simplest system, a prefix plus a running number (PO-0001, PO-0002), works for most small businesses. Add the year or a job number only if it helps you find orders faster.
| System | Looks like | Good for |
|---|---|---|
| Simple sequence | PO-0001, PO-0002, PO-0003 | A small business with one person ordering. Easiest to keep in order. |
| Year + sequence | PO-2026-0001, PO-2026-0002 | Seeing at a glance which year an order belongs to. The count restarts each January. |
| Job + sequence | 2417-01, 2417-02 (job 2417) | Contractors who track costs by job. Every PO shows which job it belongs to. |
| Buyer + sequence | PO-JM-0001 (orders by J. Martinez) | Several people placing orders, so each person's numbers never clash. |
Whichever system you pick, follow these rules:
- Never reuse a number, even for a cancelled order. Mark it "Cancelled" and keep it.
- Use leading zeros (0001 rather than 1) so orders sort correctly in a folder or spreadsheet.
- Keep a log: number, date, vendor, job and total. A spreadsheet is enough. The Excel download from the template makes a good starting point.
- Ask vendors to quote the PO number on every delivery ticket and invoice.
The purchase order template suggests the next number for you, based on the last PO you made in your browser. If you use a job-based system, type your own number over it.
Purchase order vs invoice vs work order
A purchase order is sent by the buyer before delivery to order goods. An invoice is sent by the seller afterwards to ask for payment. A work order covers labor, not goods: it authorizes and records a job.
On a typical job, you might send a purchase order to the lumber yard for materials, record the job itself on a work order, and bill your customer with a contractor invoice. For more on work orders, see what is a work order.
Check the invoice against the PO before you pay
Before paying a vendor's invoice, compare three documents: your purchase order, the delivery ticket or packing slip, and the invoice. This is often called a three-way match. If the quantities and prices agree on all three, pay it. If not, ask the vendor before paying.
This simple check catches short deliveries, substitutions and price changes, which are easy to miss on a busy job.
Frequently asked questions
Who issues a purchase order, the buyer or the seller?
The buyer. A purchase order is sent by the business that wants to buy goods or services, to the vendor that will supply them. The vendor then sends an invoice that quotes the PO number.
Is a purchase order a contract?
A purchase order is an offer to buy. Once the vendor accepts it, for example by confirming it or shipping the goods, it is generally treated as an agreement between you. The details depend on the law where you do business and any terms you and the vendor have agreed, so it is not a substitute for advice on a large or unusual order.
Can I change a purchase order after sending it?
Yes, but send the change in writing and tell the vendor before they ship. Either issue a revised PO with the same number and a revision mark, such as PO-0042 Rev 1, or cancel the original and issue a new number, and keep both on file.
Do small businesses really need purchase orders?
Not for every purchase. They are most useful for large material orders, special-order items, deliveries to a job site, and any vendor you buy from on account, because the PO number links the order, the delivery ticket and the invoice.
Should PO numbers start at 1?
They can start anywhere. Some businesses start at 1001 so the numbers don't look like a brand-new account. What matters is that every number is unique, numbers are never reused, and you can find any PO by its number.