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Definition

purchase order

A purchase order is a buyer's request to a seller to order goods.  

A purchase order is not an active order upon creation but upon acceptance from the seller. Generally, the item(s), prices and quantities have already been negotiated. Once accepted by the seller, a purchase order becomes a legal agreement to provide the mentioned goods at the agreed-upon price.

Purchase orders differ from invoices, which record transactions that have occurred. The purchase order documents of an agreement for placing an order. Buyers draft a purchase order; once accepted an invoice will be created to detail the agreed-upon order. Payment for a purchase order is due at a particular time after the invoice has been submitted, often specified as an invoice due date.

As part of procurement planning, purchase orders ensure that details are clear and correct and provide convenient audit trails when something goes wrong.

This was last updated in April 2016

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