Purchase Order (PO)

A wholesale buyer releases EUR 240,000 of stock against a live framework price list. Procurement raises a PO in the ERP referencing the framework contract, unit price, and payment terms. The supplier ships against the PO, invoices back with the PO number, and finance reconciles line-by-line before releasing payment.

A PO carries the primitives the invoice must match: buyer, supplier, contracted price, quantity, delivery address, tax code, and the PO number. The PO number is the join key across ERP, warehouse, and AP. When it is missed, payment sits in an AP exception queue or gets paid off-contract at list price.

POs are the transactional layer beneath the contractual layer. A framework agreement sets the standing commercial terms; each PO calls off against those terms at a specific quantity and price. In AP, the PO number is the anchor for invoice reconciliation and three-way matching: PO, goods-receipt, and invoice must agree on quantity, price, and delivery before payment releases. Without the PO number on the invoice, match rates collapse.

Is a PO a legally binding contract?

Once accepted by the supplier, yes. A PO is a unilateral buyer offer that becomes binding on acceptance, underneath any framework agreement already in place.

What is the difference between a PO and an invoice?

A PO is a buyer-issued authorisation to purchase before the goods ship. An invoice is a supplier-issued request for payment after the goods ship, referencing the PO number for reconciliation.

What happens if a purchase is made without a PO?

The invoice loses its match reference and either sits in an AP exception queue or gets paid at list price, bypassing the negotiated contract terms.