What Is a Purchase Order (PO)?
Somebody has to write down what was agreed before the truck leaves the godown.
A purchase order, or PO, is the document a buyer sends a supplier to order goods, listing the items, quantities, agreed rates and the delivery date. It is raised before anything ships, and once the supplier accepts it, it becomes the reference every later document gets checked against, from the delivery challan to the GST invoice.
Each line on a PO pulls from your item master, so the code, unit and last agreed rate are already there instead of being typed each time. Accepted orders then feed into inventory management.
What a Purchase Order Includes
A PO is not a wish list. Six things have to be on it, because each is something you will argue about later if missing.
| Field | Why it is on the PO |
|---|---|
| PO number | The running reference every later document quotes |
| Vendor | Who is supplying, with their GSTIN for matching |
| Items | Code, description and unit, pulled from the item master |
| Quantity | How much was ordered, which is what you count on arrival |
| Rate | The price agreed before delivery, not after |
| Delivery | The date and the outlet or warehouse it goes to |
Payment terms belong there too. Writing “30 days from delivery” settles a question that surfaces six weeks later, when nobody remembers what was said on the phone.
Purchase Order vs Invoice
One is written by the buyer. The other comes from the seller, and only one is a tax document.
| Aspect | Purchase order | Invoice |
|---|---|---|
| Raised by | The buyer | The supplier |
| Timing | Before delivery | With or after delivery |
| Says | What you agreed to buy | What you owe |
| Tax | Not charged here | GST charged and claimable |
| Status | An order, not a bill | A legal tax record |
Mixing them up gets expensive. Input tax credit is claimed off the supplier’s invoice, never off a PO, so a clerk filing from purchase orders ends up short.
Purchase Order Example
In April 2025, a three-outlet bakery in Alkapuri, Vadodara raises this order with its flour and packaging supplier before a busy weekend.
Note: this is an invented example for illustration only. The bakery, vendor and figures are not real.
Notice there is no tax total. That is deliberate, and the most useful thing a PO teaches a new assistant. A factory ordering packing film raises the same document with a different item list.
Why a PO Saves You at the Delivery Door
Picture the delivery arriving on the 12th with 20 kg of butter instead of 25. Without a PO, that becomes one person’s memory against another’s, settled by whoever argues harder. With one, the storekeeper marks a short receipt against PO-2451, and the invoice cannot quietly bill you for the full 25.
That check has a name: the three-way match. Three documents have to agree before payment goes out:
- the PO, for what was ordered
- the goods receipt, for what arrived
- the invoice, for what you are billed
It also keeps your books off negative stock, since goods entered without a matching order create phantom quantities.
Payment timing belongs on the PO as well. Under the MSMED Act, 2006, a buyer must pay a micro or small supplier within the agreed period, which cannot run past 45 days from acceptance. Delays attract compound interest at three times the RBI bank rate, with unpaid dues taken up through the MSME Samadhaan portal.
Before setting terms, run the supplier through a vendor evaluation at least once.
Find the Best Purchase Order Software
Paper POs work until a second outlet opens and two people order the same case of butter. Across the restaurant and retail businesses we work with, the pattern repeats: the best purchase order software keeps the order, the delivery and the invoice on one screen, so a short delivery is caught the day it happens.
Petpooja Purchase sits on the ordering side, comparing live vendor prices and syncing purchases into inventory. Petpooja POSS carries the same flow for restaurants, with item-wise stock deduction and day-end inventory reports.
Petpooja Invoice covers retail counters running GST billing and inventory together. If you are mapping the process out first, the guide to inventory management software is a good start.
Frequently Asked Questions
Once the supplier accepts it, yes. A PO is an offer to buy on stated terms, and acceptance turns it into a contract, which is why the quantity, rate and delivery date must be exact before you send it.
No tax is charged on a PO itself, since GST is levied on the supplier’s invoice. Most buyers still carry the vendor’s GSTIN and HSN codes so the invoice can be matched line by line later.
An indent is internal: a department asking the purchase team for something. The PO is what the purchase team then sends outside to the supplier, and only that second document commits your business to a price.
Within whatever the PO says, and for micro or small suppliers that period cannot exceed 45 days from acceptance under the MSMED Act. Larger vendors negotiate their own terms, commonly 30 or 60 days.
Yes, through a revised or amended PO carrying the same reference with a new version. Editing the original quietly breaks the audit trail, because the invoice will then match a document nobody else has.
