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Types of Purchase Orders: Explained with Examples
Understand the different types of purchase orders with examples and best practices to streamline procurement and avoid common purchasing mistakes.
You place an order expecting it to arrive on time and in full - but somewhere along the line, things fall apart. Delays, confusion, mismatched invoices, and vendor disputes crop up more often than you’d like. Sound familiar? That’s likely because the purchase order (PO) process wasn’t tailored to the actual needs of the transaction. In the world of procurement, using the wrong type of PO can cause more harm than good - leading to unnecessary delays, budget overruns, and strained supplier relationships.
That’s why understanding the different types of purchase orders is key to managing procurement efficiently. Each PO type serves a specific purpose and comes with its own best-use scenario. Knowing when to use which one helps you stay in control of spending, ensures compliance, and speeds up the procurement cycle.
In this blog, we will cover:
- What is a purchase order?
- How do purchase orders work?
- Delivery order vs purchase order
- Types of purchase orders
- Selecting the right PO type based on procurement needs
- Common mistakes when managing purchase orders
- How Spendflo helps optimize purchase order management
- Frequently asked questions on types of PO
What is a Purchase Order?
A purchase order (PO) is a formal document issued by a buyer to a supplier to confirm a purchase. It includes details like item type, quantity, price, and delivery terms - creating a legally binding contract once accepted.
How Do Purchase Orders Work?
The purchase order process follows a structured sequence to ensure clarity, compliance, and timely fulfillment:
1. Identify the Need: A department recognizes the requirement for goods or services and raises an internal request.
2. Submit a Requisition: The request is documented as a purchase order form and sent for internal approval.
3. Approval & PO Creation: Once approved, the purchasing department or finance team generates a formal PO with a detailed description, quantity of items, pricing, delivery timeline, and payment terms.
4. Send PO to Supplier: The PO is sent to the vendor for review. Upon acceptance, it becomes a binding agreement based on agreed-upon terms.
5. Order Fulfillment & Delivery: The supplier ships the items or delivers the service as per the PO.
6. Receipt & Verification: The receiving team checks the delivery against the PO to confirm item accuracy and quality.
7. Three-Way Match: The PO, supplier invoice, and receiving report are compared to validate the transaction before payment approval.
8. Payment & Record Keeping: Once verified, payment is processed, and records are stored for audit and tracking.
This end-to-end process ensures that all purchases align with budget controls, company policies, and procurement goals.
Delivery Order vs Purchase Order
While both documents are part of the procurement process, they serve different purposes. A purchase order initiates the transaction, while a delivery order authorizes the release or shipment of goods.
Here's a breakdown:
Types of Purchase Orders
Not all purchases are the same - some are one-time buys, others are recurring needs, and some are based on forecasts. This is why procurement teams use each purchase order type. Each PO type is designed to serve specific procurement scenarios, offering flexibility and control depending on the complexity of the transaction. Understanding the differences can help organizations streamline purchasing, reduce errors, and align with budget goals.
Standard Purchase Order
A Standard Purchase Order (SPO) is the most common type. It’s used for one-time, well-defined purchases where all the details - such as items, quantity, price, and delivery date - are known upfront.
What It Contains
- Specific items or services to be purchased
- Exact quantities and pricing
- Delivery location and expected date
- Payment and invoice terms
Example: A company needs 20 laptops for a new team. The procurement team creates a standard PO with specifications for brand, model, quantity, cost per unit, delivery date, and shipping address.
When to Use: Use standard POs when you have complete information and expect the transaction to be completed in one go.
Blanket Purchase Order
A Blanket PO is used for repeated purchases from a single vendor over a period. It sets a spending limit and general terms, but doesn’t define the specific quantity of items or delivery dates initially.
What It Contains
- Agreed pricing and terms for future orders
- Total spending cap
- Timeframe of the agreement
- Vendor and billing details
Example: An office places a blanket PO with its stationery supplier for $10,000 worth of supplies to be delivered as needed over six months.
When to Use
Use blanket POs when you need recurring goods or services but don’t want to create a new PO every time.
Contract Purchase Order
A Contract PO is used when there's a need to establish a long-term agreement with a vendor, but the specific items and delivery details are not finalized yet.
What It Contains
- General terms and conditions
- Contract duration and vendor obligations
- Reference number for future POs
- High-level scope of the contract
Example: An IT company signs a yearly contract with a vendor for cloud services, setting terms and rates but without ordering specific services right away.
When to Use: Use contract POs when forming strategic vendor agreements where purchases will be made later under the agreed terms.
Planned Purchase Order
A Planned PO is a hybrid model. It outlines anticipated purchases including items, pricing, and schedules - but each actual release requires a confirmation, called a release order.
What It Contains
- Forecasted demand with tentative delivery schedules
- Item details, pricing, and vendor terms
- Authorization process for individual releases
Example: A manufacturer anticipates needing 5,000 units of a part over the year. A planned PO is created with monthly delivery forecasts, and actual orders are issued closer to need.
When to Use: Use planned POs when you expect repeated purchases but want to maintain flexibility with release timing and quantity.
Selecting the Right PO Type Based on Procurement Needs
Choosing the right type of purchase order isn’t just a matter of preference - it directly impacts procurement efficiency, supplier relationships, and budget control. The key is to align your PO type with the nature of the purchase, how often it occurs, and the level of detail available upfront. Selecting the right PO type also contributes to smoother supply chain operations by improving vendor coordination and reducing procurement friction.
Below are five procurement scenarios and the best PO types to use for each:
One-Time, Well-Defined Purchases
When the item, price, quantity, and delivery date are all known, a Standard PO is ideal. It’s best suited for individual transactions like buying laptops, office chairs, or project-based consulting services.
Recurring Purchases from the Same Vendor
If your team orders the same items regularly - like office supplies, printer cartridges, or maintenance services - a Blanket PO saves time by avoiding repeated paperwork while keeping costs under control.
Strategic Long-Term Vendor Relationships
For ongoing vendor agreements with no specific purchase details yet - such as software partnerships or legal retainers - use a Contract PO. It sets the legal framework and pricing terms for future orders.
Forecasted Demand with Flexible Delivery
In manufacturing or operations with predictable but flexible needs, a Planned PO works well. You set the plan upfront and issue release orders as needed, allowing for inventory control without overstocking.
Urgent or Ad-Hoc Purchases with Limited Info
If a purchase must be made quickly and full details aren't yet available, start with a Contract PO or consider converting a requisition to a Standard PO once information is confirmed.
Common Mistakes When Managing Purchase Orders
Even well-structured purchase order systems can fail if not managed correctly. From miscommunication to compliance issues, small mistakes can lead to costly procurement delays and inefficiencies. Being aware of these pitfalls can help teams refine their processes and avoid unnecessary spend.
Here are six common mistakes to watch out for:
1. Using the Wrong Type of PO
One of the most frequent mistakes is using a standard PO when a blanket or planned PO would be more suitable. This leads to repetitive admin work and may limit flexibility for recurring or forecasted purchases.
2. Incomplete or Inaccurate PO Details
Leaving out critical information - like item specifications, delivery dates, or payment terms - can cause confusion, shipment delays, or disputes with vendors. Every PO should be reviewed thoroughly before being issued to ensure it aligns with company policies.
3. Lack of PO Approval Controls
Skipping or bypassing the approval process puts companies at financial and compliance risk. Without clear authorization protocols, unauthorized purchases can slip through and disrupt budgeting.
4. Poor Vendor Communication
Failure to confirm PO receipt or clarify expectations with vendors leads to misaligned deliveries and disputes. Consistent communication helps ensure vendors fulfill the order exactly as intended.
5. No System for Tracking PO Status
Without a centralized system to monitor the status of POs, businesses lose visibility over procurement workflows. This results in missed deliveries, payment delays, or duplicate orders.
6. Manual and Disconnected Workflows
Managing POs through spreadsheets or email leads to errors and lost data. Manual systems also lack the integration needed for real-time updates, making it hard to match invoices, deliveries, and payments accurately.
How Spendflo Helps Optimize Purchase Order Management
Managing purchase orders manually often leads to delays, errors, and budget mismatches.Spendflo solves these issues by bringing structure, speed, and visibility to your procurement workflows. Here’s how:
Centralized Visibility and Control: Spendflo offers a unified dashboard to track all purchase orders, vendor contracts, and approvals - giving finance and procurement teams full visibility into every transaction.
Automated Workflows and Approvals: Manual PO creation and approval delays are eliminated with Spendflo’s automated workflows. Teams can quickly generate, route, and approve POs, ensuring faster cycle times and fewer errors.
Budget and Contract Alignment: Spendflo ensures every PO aligns with approved budgets and contract terms. This reduces maverick spending, improves compliance, and keeps procurement aligned with financial goals.
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Frequently Asked Questions on Types of PO
What are the four main types of purchase orders?
The four main PO types are Standard, Blanket, Contract, and Planned POs - each designed for different procurement needs, from one-time buys to long-term vendor agreements and forecast-based ordering.
How do I decide which PO type to use?
Choose based on purchase frequency, detail availability, and delivery flexibility. Use Standard POs for one-time buys, Blanket for recurring needs, Contract for long-term agreements, and Planned for forecasted orders.
Can PO types be changed after issuance?
Once issued, POs can’t typically be edited without cancellation or revision. It’s important to review and finalize details before issuing to avoid disruptions or needing re-approval.
What are common issues with standard POs?
Standard POs often face issues like incomplete data, lack of approval, or delays in communication. These problems can cause shipment errors, invoice mismatches, and payment delays.
Are digital POs more effective than manual ones?
Yes, digital POs reduce human error, speed up processing, and integrate with procurement systems. They also provide better visibility, tracking, and audit trails compared to manual methods.
How long are purchase orders valid for?
The validity of a purchase order typically depends on the agreed period of time between the buyer and vendor. This can range from a few weeks to several months, based on contract terms or recurring supply needs.
Can I reference a previous purchase when creating a new PO?
Yes, referencing a previous purchase can help ensure consistency in pricing, specifications, and vendor terms. Many procurement systems allow you to duplicate or link to prior POs for faster processing.
Where does a PO fit into the purchasing process?
The purchase order is a critical step in the purchasing process. It comes after internal approval of a requisition and before the delivery of goods, serving as the formal authorization to buy.
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