Purchase Order
Financial Dictionary — Procurement & Purchasing
Definition
A purchase request from the buyer to the seller stating the merchandise to be purchased, its prices, specifications, and terms of payment, specified by a specific period. Acceptance of the purchase order constitutes a purchase contract and is legally binding for all parties. Also referred to as acronym P.O
Use cases, Example & Why it matters
Use cases
- Used in the purchase-to-pay cycle to validate invoices, approvals, and supporting documents.
- Used to strengthen internal controls over purchasing and supplier payments.
- Used to strengthen internal controls over purchasing and supplier payments.
Example
- Example: Before payment, the AP team applies **Purchase Order** to confirm the invoice matches the approved purchase documentation.
Why it matters
- Why it matters: Prevents incorrect/duplicate payments, reduces fraud risk, and improves accuracy of payables and expenses.