Purchase Order

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

A purchase order (PO) is a buyer’s formal document to a seller specifying items, quantities, prices, and terms; acceptance forms a binding contract.

- Used in the purchase-to-pay cycle to validate invoices, approvals, and supporting documents.
- Used to strengthen internal controls over purchasing and supplier payments.

- Example: Before payment, the AP team applies **Purchase Order** to confirm the invoice matches the approved purchase documentation.

- Why it matters: Prevents incorrect/duplicate payments, reduces fraud risk, and improves accuracy of payables and expenses.