Buying and selling
What is a purchase order (PO)? Meaning and format
Definition
Purchase order: A purchase order is the document a buyer sends a supplier to order goods, stating what to supply, how much, at what price and by when.
Also called: PO, Purchase order meaning, PO number, Purchase order format
What a purchase order does
A purchase order, or PO, turns a phone call or a WhatsApp message into a clear written order. It tells the supplier exactly what you want, in what pack and at what price, and it gives both sides a number to quote on the delivery challan, the bill and the payment. Once the supplier accepts it, it is the agreed basis of the deal.
A PO is not a tax document, so GST law does not set its format. Its value is in checking. When the goods arrive and the bill comes, you compare three documents before paying: the purchase order, the goods received note and the supplier's bill. This is called three-way matching, and it catches short deliveries and wrong rates before the money goes.
What a purchase order should contain
A useful PO, on paper or in software, carries:
- PO number and date.
- Your business name and GSTIN, and the delivery address, such as the godown receiving the goods.
- The supplier's name, address and GSTIN.
- Each item with description, pack size, quantity, rate and GST rate.
- Expected delivery date and payment terms, such as 30 days from the bill date.
- Short terms, such as quote this PO number on your invoice, and goods accepted after inspection.
Common purchase order mistakes
The most common mistake is ordering in one unit and being billed in another: 10 sacks on the PO, 250 kg on the bill. Write the pack size on every line. Others are agreeing a new price on the phone without changing the PO, paying the bill without checking it against the PO and what arrived, and leaving a PO open after the supplier says the rest will not come, so stock looks as if it is still on the way.
Worked example
A purchase order from a masala maker
A Nashik masala maker raises PO-00031 to a supplier in Erode, Tamil Nadu: 20 sacks of 25 kg turmeric at ₹3,400 a sack and 10 sacks of 25 kg coriander at ₹2,900 a sack, delivered to its Nashik godown by 5 November. The value is ₹68,000 + ₹29,000 = ₹97,000 before GST. Because the supplier is in another state, its bill will carry IGST, and because the load is over ₹50,000, it will travel with an e-way bill. The PO asks the supplier to quote PO-00031 on the bill and the challan.
In managemate
In managemate, a purchase order starts with the supplier and the location receiving the goods. Lines fill in with each product's purchase price, GST rate and the pack you buy in, such as a 25 kg sack or a carton of 24, and can be added by search or by scanning. Freight and other charges can be added and are spread into the landed cost of the stock. The PDF is titled Purchase order and shows the PO number (PO-00001 by default), date, expected-by date and place of supply, asks the supplier to quote the PO number on their invoice, and prints standard terms on inspection and delivery hours. Goods are received against it in parts, the supplier's bill is recorded against it, and the reorder list can draft one purchase order per supplier.
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