# How to create a purchase order, step by step, with an example

> How to create a purchase order (PO) in 8 steps: fields, approval, PO numbers, a worked example with totals, and how to match the PO to the invoice.

Canonical: https://www.invoqk.com/blog/how-to-create-a-purchase-order-step-by-step-with-an-example
Last updated: 2026-10-31

## Key takeaways

- To create a purchase order, assign a unique PO number, list the supplier, items, prices, delivery and payment terms, get approval, then send it before anything ships.
- A purchase order is the buyer's order and comes before the invoice; the supplier's invoice should quote the PO number so the two can be matched.
- Keep the PO, quote, delivery note and invoice together under one PO number, because tax authorities can ask for them for years.

To create a purchase order, assign a unique PO number, list the supplier, the items, the agreed prices and the delivery and payment terms, get the order approved, and send it to the supplier before anything ships. A **purchase order** is a document a buyer sends to a seller to order goods or services at stated prices and terms. This guide shows how to create a PO in eight steps, with a worked example you can copy.

It is written for freelancers and small businesses in the United States, the United Kingdom and Germany. It describes common practice and cites the published rules. It is not legal or tax advice.

## How do you create a purchase order in eight steps?

Create a purchase order by working through eight steps in order. Each step prevents a specific error later, such as a wrong price, a missing approval or an invoice that cannot be matched.

1. **Confirm the need.** Check that the item or service is not already in stock or covered by an existing order.
2. **Get a quote.** Ask the supplier for a written price, a lead time and payment terms. A quote is the supplier's offer. The PO is your acceptance of it.
3. **Pick the PO number.** Use the next number in a running sequence, such as PO-2026-0042. Never reuse a number.
4. **Fill in the parties.** Add your legal name, billing address and contact. Add the supplier's name and address. Add a delivery address if it differs.
5. **List every line.** For each line write a description, a part or SKU number, a quantity, a unit price and a line total.
6. **Add terms.** State the delivery date, shipping method, who pays freight, payment terms such as Net 30, and the currency.
7. **Get approval.** Have the budget holder sign or approve it. Do this before you send it.
8. **Send and file.** Email the PO as a PDF, ask the supplier to confirm, and store one copy with the quote and later the invoice.

If you work alone, step 7 is still worth doing. A two-line approval note ("approved, budget line: studio equipment, October 8, 2026") makes the purchase easy to explain at tax time.

## What does a purchase order need to contain?

A purchase order needs enough detail for the supplier to fill the order without asking questions. These are the fields most buyers use.

| Field | Why it matters | Example |
|---|---|---|
| PO number | Lets both sides match the invoice | PO-2026-0042 |
| Issue date | Starts the clock on lead time | October 8, 2026 |
| Buyer details | Names who orders and who pays | Northside Print Co., 14 Elm Road |
| Supplier details | Names who must deliver | Harbor Paper Ltd. |
| Line items | The exact scope of the order | 20 reams, A4, 90 gsm |
| Unit price and line total | Fixes the price before delivery | $6.40 x 20 = $128.00 |
| Delivery date and address | Sets when and where | October 20, 2026, warehouse |
| Payment terms | Sets when the invoice is due | Net 30 |
| Tax and total | Shows the full commitment | $128.00 + tax |
| Approval | Proves authority to spend | Signed by A. Reyes |

Leave out nothing in the "scope" rows. A PO that says only "paper, 20" invites a dispute about size, weight and price.

## Worked example: a filled-in purchase order

The example below is a purchase order from a small print shop to a paper supplier. Every figure is an assumed 2026 illustration, so replace each one with your own.

```
PURCHASE ORDER                       PO No.: PO-2026-0042
Date: October 8, 2026                Delivery by: October 20, 2026

Buyer:    Northside Print Co., 14 Elm Road, Leeds
Supplier: Harbor Paper Ltd., 9 Dock Lane, Hull
Ship to:  Northside Print Co., Unit 3 (rear loading bay)

Item                      SKU       Qty    Unit price     Line total
A4 paper, 90 gsm, ream    A4-90      20       £6.40         £128.00
A3 paper, 120 gsm, ream   A3-120      8      £14.25         £114.00
Delivery charge                       1       £12.00         £12.00

Subtotal                                                    £254.00
VAT (standard rate)                                          £50.80
TOTAL                                                       £304.80

Payment terms: Net 30 from invoice date.
Please quote PO-2026-0042 on your invoice.
Approved by: A. Reyes, Operations
```

The arithmetic is simple. The first line is 20 x £6.40 = £128.00. The second is 8 x £14.25 = £114.00. The delivery charge is £12.00. The subtotal is £254.00, and 20% of £254.00 is £50.80, which gives £304.80.

The VAT line uses the UK standard rate of 20%, which [GOV.UK VAT rates](https://www.gov.uk/vat-rates) lists as the rate for most goods and services. Check the current rate for your country, because a PO that shows the wrong tax rate causes mismatches with the supplier's invoice.

## What is the difference between a purchase order and an invoice?

A purchase order is the buyer's order. An invoice is the seller's request for payment. The PO comes first, and the invoice comes after delivery and should quote the PO number.

For example, the print shop above sends the PO on October 8. Harbor Paper delivers on October 17 and invoices on the same day. The invoice must show the sequence number, the supply date, the net amount and the tax. In Germany, [§ 14 UStG](https://www.gesetze-im-internet.de/ustg_1980/__14.html) lists those required fields, including the full name and address of both parties, a sequential invoice number, the date of supply and the tax rate and amount.

The buyer's check is a **three-way match**, which is a comparison of the purchase order, the delivery note and the supplier's invoice. If the quantity, price or tax differs on any of the three, the buyer queries it before paying. That is the entire point of writing a careful PO. The table above shows the fields at a glance, so you can see which ones the invoice must repeat.

## Is a purchase order legally binding?

A purchase order is normally an offer to buy, and a supplier who accepts it creates a contract. Rules differ by country, so treat this as general information only.

In Germany, [§ 145 BGB](https://www.gesetze-im-internet.de/bgb/__145.html) says that a person who offers to conclude a contract is bound by the offer, unless they have excluded being bound. In practice, a buyer who sends a clear PO and a supplier who confirms it have a deal. Standard clauses, such as a validity period or a cancellation window, set the exceptions.

Put one sentence on every PO to avoid arguments: "This order is valid for 14 days and may be cancelled in writing before dispatch." Adapt the wording to your own terms and check it with an adviser if the order is large.

## When do you need approval, and how do you handle changes?

Set a spending limit above which a second person approves. For example, a four-person studio might let anyone order up to £250 and require the owner's sign-off above that. The limit is your own policy, not a legal rule, so write it down once and apply it every time.

A **purchase requisition** is an internal request to buy something, raised before the PO. In a small business it can be a one-line message such as "need 20 reams of A4 by October 20". The PO is what turns that request into an order the supplier can act on.

Changes need a paper trail too. If the quantity or price changes after you send the PO, issue a revised PO with the same number and a suffix, such as PO-2026-0042-R1. Ask the supplier to confirm the revision in writing. Never agree a change by phone only.

## How do you number purchase orders?

Number purchase orders in one running sequence and never reuse a number. A good format is a prefix, the year and a counter: PO-2026-0001, PO-2026-0002 and so on.

Keep two simple rules:

- **One sequence for the whole business.** Do not run separate lists for each person unless each person has a distinct prefix.
- **Void, never delete.** If you cancel PO-2026-0043, keep it in the log marked "void". A gap with no explanation looks like a missing order.

Our guide [What is an invoice number? How to number invoices](/blog/what-is-an-invoice-number-how-to-number-invoices) covers the same discipline for the documents the supplier sends back.

## How long should you keep purchase orders?

Keep each purchase order with the quote, the delivery note and the invoice for as long as your tax authority can ask for them. In the United States the default is 3 years. It becomes 6 years if you leave out more than 25% of your gross income, and indefinitely if you file no return or a fraudulent one, according to the [IRS record retention guidance](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records).

Store the four documents together under the PO number. A single folder named PO-2026-0042 holds everything an accountant will ask for.

## What mistakes make purchase orders fail?

Most failed purchase orders trace back to the same six habits. Fix these and you remove most disputes.

- **Vague descriptions.** "Paper" is not an order. Add size, weight and a SKU.
- **No price.** A PO without prices is a wish list. Agree prices first.
- **Sending after delivery.** A PO raised after the goods arrive is an invoice in disguise and invites queries.
- **No approval.** Unapproved orders are the first thing an auditor flags.
- **Wrong tax or currency.** A mismatch with the supplier's invoice stalls payment.
- **Not quoting the number.** If the supplier's invoice has no PO number, matching takes manual work.

If you issue a lot of orders, the [Invoqk purchase order generator](/purchase-order-generator) fills in the lines, totals and tax from a short description, and keeps the number sequence for you.

Spot a mistake in this guide? [Contact](/contact) the Invoqk editorial team and we will check it against the sources. You can also read [about Invoqk](/about) and who writes these guides. For a side-by-side view of the three documents, see the table above, or our [Purchase order sample: format, fields and a worked example](/blog/purchase-order-sample-format-fields-and-a-worked-example), which shows a printable layout and Excel formulas.

## FAQ

### How do I create a purchase order?

Assign a unique PO number, add your details and the supplier's, list each item with quantity and unit price, state delivery and payment terms, get approval and email the PDF to the supplier. Ask them to confirm and file the PO with the quote and invoice.

### How do I create a PO number?

Use one running sequence with a prefix, the year and a counter, such as PO-2026-0042. Never reuse a number. If you cancel an order, mark it void in your log instead of deleting it, so there are no unexplained gaps.

### Who creates a purchase order, the buyer or the seller?

The buyer creates the purchase order. The seller creates the invoice. If a seller sends you a document called a PO, it is usually an order confirmation or a quote, so check which it is before you rely on it.

### Is a purchase order a legal contract?

A purchase order is normally an offer to buy, and a supplier who accepts it creates a contract. In Germany, section 145 of the BGB binds a person to their offer unless they excluded being bound. Check local rules for large orders.

### What is a three-way match?

A three-way match compares the purchase order, the delivery note and the supplier's invoice. If the quantity, price or tax differs on any of the three, the buyer queries it before paying. It is the main control that a careful PO supports.

## Related

- [Free invoice template guides: compliance & getting paid](https://www.invoqk.com/blog)
- [Invoqk home](https://www.invoqk.com)