What is a Purchase Order?

A purchase order is a written authorization from a buyer to acquire goods or services. The document authorizes a supplier to deliver to the buyer at the price, quality level, delivery date, and certain other terms specified in the agreement. A purchase order is legally binding after the supplier counter-signs it.

Master Purchase Orders

A purchase order is time-consuming to create. To reduce the workload, some organizations issue a master purchase order to each supplier, authorizing considerably more than is initially needed, and then issue releases against the master purchase order, as needed. To save time, many purchase orders are now delivered in electronic format over the Internet.

Disadvantages of Purchase Orders

The development of a purchase order can be a time-consuming process. As such, it can significantly impede the purchasing process within a business. Consequently, its use tends to be limited to higher-value purchases.