A purchase order is a document sent to a supplier or vendor, authorizing shipment of a product to the customer at a specified price and terms. The creation of a purchase order creates a legally binding contract which cannot be changed without the consent of both parties.
A customer may sometimes create an open or standing purchase order which allows the customer to order quantities of the product(s) from the vendor over a period of time (usually a year) at the specified price. Open POs are often used for services which occur over a period of time.
The typical sections of a purchase order are:
- The purchase order number
- Names and addresses of both the customer and the supplier/vendor.
- Description of the items being ordered, the cost for each, and the total amount.