GLOSSARY

PO: Purchase Order

What is a purchase order? Often abbreviated as PO or P.O., a purchase order is an official document that outlines the logistics of a financial transaction between a buyer and a supplier. It includes details such as the description, quantity, pricing and shipping information of products or services being purchased. Generally, when a buyer places an order to purchase goods from the supplier, they submit a purchase order in writing to ensure terms and conditions of sale are established beforehand. The PO serves as an agreement between both parties that the buyer will pay for goods or services delivered by the supplier at a agreed date and price. Thus, it serves as an important tool in ensuring logistics are transparent and clear for both parties involved in the transaction.

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What are the key components of a Purchase Order (PO)?

The components of a PO include item details such as the product description, unit of measure (UOM), number of units ordered, and pricing for each unit as well as partner information such as buyer/seller address, contact details, tax-related information such as tax rate or exemption status.

A PO might also include terms and conditions that govern the transaction, which could be related to payment terms and return policies.

Finally, it’s important that the PO includes an expiration date so all parties are aware of when specific items need to be shipped and payments due. Properly completed POs streamline logistics processes between buyers and sellers.

Key Takeaways

What, exactly, is a purchase order (PO)?

    • A purchase order is an official document that outlines the logistics of a financial transaction between a buyer and a supplier.
    • Details typically include the item or service description, quantity, pricing and shipping information.

How is a Purchase Order (PO) created?

Creating a Purchase Order (PO) is often the first step when acquiring goods or services. A PO is a document used to clearly communicate an organization’s intention to transition from the negotiation and agreement stage to the ordering and payment one. Generally, POs are created by logistics managers or professionals in charge of buying activities within an organization, often using purchase order management software. The PO identifies the items or services being purchased as well as their costs, payment details, delivery dates, among other relevant information. POs must be precise and accurate as they will serve as the legal documentation for all parties involved in the transaction.

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