Glossary
What is Purchase order (PO)?
A purchase order is the document sent to a supplier listing the items, quantities and agreed prices you want to buy. It is the record you later match against the goods received and the supplier bill, which is how shortages and overcharges are caught.
A purchase order is your side of the deal written down before the goods arrive. It tells the supplier what to send, and later it tells you what you should have received and what you should be charged.
What a purchase order should contain
- Your business name, PAN and delivery address.
- The supplier’s name and PAN.
- A PO number and date.
- Each item with quantity, agreed rate and any discount.
- The expected delivery date and payment term.
- Totals, with VAT shown separately where it applies.
A PO is not a bill. It moves no stock, creates no amount owed and cannot support an input VAT claim. Only the supplier’s tax invoice does that.
How it works in practice
The PO is the first of three documents. When the delivery arrives, a goods received note records what actually came. When the supplier’s bill follows, you compare all three: what you ordered, what arrived and what you are being charged.
As an example, an FMCG distributor orders 200 cartons of biscuits at Rs 1,150 a carton. The truck brings 185, and the bill charges for 200 at Rs 1,180. When the bill is checked against the PO and the GRN, both problems show at once: 15 cartons short and a rate Rs 30 above what was agreed. Without the PO, the rate difference usually goes unnoticed. Without the GRN, so does the shortage.
Common mistakes
- Ordering by phone and never writing the PO, so there is nothing to check the bill against.
- Agreeing a change with the supplier after the PO is sent without updating the PO.
- Ordering from memory instead of from items that have reached their reorder level.
- Letting anyone raise a PO with no approval, so an unchecked order turns into money you owe.
Where it matters most
Wholesalers and distributors buying from many suppliers, pharmacies ordering from medical distributors, hardware dealers taking part deliveries against one order, and manufacturers buying raw material.
A free purchase order format works while you are still on paper. In Kuver Books, a purchase order moves through draft, pending, approved and completed, and the goods receipt and purchase bill are raised from it without retyping, as the purchase bills page explains.
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