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How to make a Purchase order

A purchase order, also known as a work order, confirms an order of goods or services by a purchasing company (the client) from the provider (supplier). It sets out types and quantities of goods purchased, specifies any services requested and includes the details of agreed costs. Purchase orders are used by many businesses as part of their standard purchasing processes to clarify terms of transactions, prior to services being carried out or goods being delivered by the supplier.

Whether you're a purchaser or seller, use this purchase order template when buying, ordering or providing goods and services. In addition to the existing terms and conditions, this purchase order template will act as a formal offer for the supply of goods and/or services in return for payment. 

This purchase order covers the description of what is to be bought or sold, the contact details of the buyer and seller, as well as the price and payment details. This purchase order will calculate the subtotal, discount, vat and purchase total automatically for you.

Use this purchase order:

  • as a purchaser, to buy or order goods and services
  • as a seller, to provide to customers to buy and sell goods and services
  • in addition to terms and conditions which protect your position
  • for businesses located in England, Wales or Scotland

This purchase order covers:

  • the sale and purchase of goods or services
  • the description of what is to be bought
  • the names and contact details of the buyer and seller
  • the price, delivery fees and any VAT payable

A purchase order forms part of the overall contract, explicitly stating what has been requested by the client or purchaser and setting out additional terms. It helps the buyer by ensuring that all costs are specified in advance, and it also serves as proof to the seller of what has been ordered. As such, it can be used by both businesses during a transaction.

As well as serving as proof of intentions, purchase orders can also improve the streamlining of purchasing processes and help ensure that accurate records are kept for accounting and auditing purposes.

A purchase order should include the following:

  • the word 'Purchase Order' should be clearly displayed
  • a unique purchase order (PO) identification number
  • the date the purchase order was created
  • agreed dates for delivery of goods and/or services
  • the company name (individual name if sole trader) of both vendor and purchaser and contact details
  • a description of the goods or services ordered and individual costs/fees
  • the total cost, any agreed delivery fees and VAT if applicable, and
  • any agreed payment terms

A purchase order requests the provision of specific goods or services; the invoice requests payment for the supply of these goods or services.

Purchase orders should always precede invoices. A purchase order may be used as the basis of an invoice, and invoices should always reflect the details contained in a purchase order (in particular the agreed fees/amounts). Many purchasers require the relevant purchase order number to be included in any Invoice in order to streamline their processing and ensure that everything tallies up.

A purchase order can include a note of any payment period, if agreed, or a preferred payment period if one was not discussed (although this may not be binding). The standard payment period is within 30 calendar days of receipt of invoice, beyond which the payment is considered late (unless otherwise agreed) and a statutory demand can be made.

If you only deal with a handful of contractors and prefer to keep things informal, you might choose to omit purchase orders from your transactions. However, some contractors will demand a purchase order before starting work. Also, having a formal contracting system in place, which includes purchase orders, can help to prove the status of contractors - so they are not classified as employees for purposes of IR35.

The Rocket Lawyer invoice only allows you to charge one rate of VAT or one rate of discount applicable to all the products or services. If you wish to charge different rates or VAT for different items, then you can either create multiple invoices or Ask a lawyer to get help drafting a bespoke invoice.

Ask a lawyer for:

  • more information about drafting your terms and conditions if you are a purchaser or seller
  • problems identifying the contract where there are competing terms and conditions on the back of orders, order acknowledgements and delivery notes
  • international sales
  • advice if you charge different rates of VAT or discount

Other names for Purchase order