A Purchase Order is a legally binding commercial source document issued by a buyer to a vendor to make repeat orders for goods or services from a business. It is a standard document that is essential for a well-managed purchasing process. Once a purchase order is accepted by the vendor, it becomes a legally binding contract. A sample template of a Purchase Order can be found here.
A Purchase Order indicates the basic details of a transaction including the delivery date, delivery address, the description of goods/services, the price, quantity, shipping terms, taxes, and the payment terms.
Key Takeaways
A Purchase Order is a legal document that is used to make repeat orders for goods or services from businesses.
What to include in a Purchase Order?
A Purchase Order includes:
1. Shipping Details
The shipping method, delivery date, delivery address and any other shipping terms should be included in the Purchase Order.
2. PO Number
This is a unique number that can be assigned to the purchase order. It will enable both the buyer and vendor to track the purchase orders sent/ received by them.
3. Contact information
The name, address, phone number, email and other contact information of both buyer and seller should be specified. Since the purchase order will be used by both buyer and seller, contact information is crucial for future communication.
4. Item Description/Service Description
The name of the items, as well as identifying information such as size, colour, or model number should be listed in further detail. However, if the PO is for services then a detailed description of the services should be specified in the PO.
5. Quantity of goods
The number of each item ordered should be clearly listed. Quantities should correspond clearly to the item number and description.
6. Price
Prices for each item should be listed with the quantities so that both parties can clearly see the original amounts being charged. The PO should specify the unit price as well as the total price of all the goods/services.
7. Terms and conditions
The terms and conditions of a Purchase Order typically include the following:
- Definitions
- Agreement
- Delivery of Goods and Services
- Price/ Payment Terms
- Taxes
- Any required legal compliances
- Product/ Service Warranties
- Warranty Remedies.
- Indemnities
- Limitation of Liability
Key Takeaways
A Purchase Order (PO) usually includes items such as shipping details, PO number, contact information, item/ service description, quantity of goods, price and relevant terms and conditions.