Ever placed an order and realized halfway through the process that something’s missing - like clarity, approval, or a proper record? Multiply that chaos across departments, vendors, and budgets, and you’ve got a procurement nightmare. That’s why purchase orders exist. They bring order to… well, purchasing. But not all purchase orders are created equal - and knowing which type to use when can make all the difference.

‍

What this blog covers: 

‍

• What a purchase order is and how it works
• Key components and structure of a typical purchase order
• Common misconceptions and what purchase orders don’t include
• Differences between purchase orders, work orders, and delivery orders
• A breakdown of the four main types of purchase orders with examples
• Essential terminology to know before creating purchase orders
• Step-by-step instructions to create an effective purchase order
• Why purchase orders are critical for budget control and vendor management
• How Spendflo helps streamline and automate purchase order workflows
• Frequently asked questions on types of purchase orders

‍

What Is a Purchase Order?

A purchase order (PO) is a formal document issued by a buyer to a vendor that outlines the details of a purchase, including items, quantities, prices, and delivery terms. It acts as a legally binding agreement once accepted, helping organizations maintain financial control, streamline procurement, and avoid misunderstandings with vendors. In case of disputes, the PO offers legal protection by documenting agreed-upon terms.

‍

Key Components of a Purchase Order

A purchase order is more than a simple form - it’s a structured document that brings consistency and accountability to the buying process. When done right, it ensures that both the buyer and the vendor are aligned on expectations from the start.

‍

PO Number and Issue Date

Every PO begins with a unique purchase order number, which is essential for tracking and audit purposes. The issue date records when the PO was created and sent to the vendor. 

‍

Buyer and Vendor Information

This section includes the names, addresses, and contact details of both parties. It clarifies who’s placing the order and who’s responsible for fulfilling it.

‍

Itemized List of Goods or Services

Here’s where the actual order details live - products or services, quantities, unit prices, item codes, and sometimes brief descriptions. This is the most critical part of the PO for avoiding order errors.

‍

Pricing and Payment Terms

This outlines the agreed-upon pricing structure, including any taxes, shipping costs, or discounts. Payment terms such as “Net 30” or “50% upfront” define when and how the vendor will be paid.

‍

Delivery Instructions

Details like shipping address, expected delivery date, and any special instructions are included to ensure the order arrives as needed. These details complete the core of the purchase order document. 

‍

Approval and Reference Fields

Some POs require sign-offs from department heads or finance. Others may include internal tags or cost center codes for easier tracking. Many ERP systems integrate these fields automatically to streamline procurement data flows. 

‍

What Does a Purchase Order Look Like?

A purchase order typically resembles a structured form or digital document with clearly marked sections. At the top, it lists the PO number, date, and contact information for both buyer and vendor. The center contains an itemized table showing descriptions, quantities, prices, and totals. Below that are payment terms, delivery details, and approval fields. Whether paper-based or digital, a good PO is clean, organized, and easy to read - making the buying process smooth and traceable. A modern purchase order system can automate this format and reduce manual entry errors. 

‍

How Do Purchase Orders Work?

A purchase order begins when a team identifies a need and submits a request. Once approved, a PO is created with item details, pricing, and terms, then sent to the vendor. When the vendor accepts it, the PO becomes a binding agreement. The goods or services are delivered, verified, and matched against the PO and invoice. If everything aligns, payment is processed. Throughout, the PO acts as a control tool - keeping purchases organized, traceable, and compliant.

‍

What a Purchase Order Usually Doesn’t Include

While purchase orders cover key purchase details, they don’t include everything. Legal clauses, confidentiality terms, or detailed performance expectations are typically left out and handled through contracts or service-level agreements. POs also don’t define change management processes or handle  disputes. Relying solely on a PO for complex deals can lead to misunderstandings, so it’s important to pair it with the right legal or contractual documents when needed.

‍

Work Order vs. Purchase Order: What’s the Difference?

While both documents help manage tasks and spending, a purchase order and a work order serve different purposes in procurement and operations. Here’s a quick comparison:

‍

‍

A purchase order is for buying. A work order is for doing. Both are essential but operate in different parts of the workflow. 

‍

Delivery Order vs. Purchase Order: Use Cases Compared

Though they often work together, a delivery order and a purchase order serve different roles in the buying and fulfillment process. Here’s how they compare, along with when each is typically used:

‍

1. Purchase Order (PO)

A PO is issued by the buyer to the vendor to initiate a purchase. It includes product details, pricing, quantities, payment terms, and delivery expectations. Most purchase order forms follow a standardized layout for clarity and compliance. It acts as a formal request and agreement to buy.

‍

Use Case:

A marketing team orders 1,000 printed brochures from a supplier, outlining quantity, cost, and delivery date in the PO.

‍

2. Delivery Order (DO)

A DO is issued by the seller (or logistics team) to release goods for delivery to the buyer. It confirms that the items mentioned in the PO are now being dispatched. Delivery orders play a key role in keeping the supply chain responsive and efficient. 

‍

Use Case:

The supplier sends 500 brochures to one office and 500 to another. A delivery order is created for each shipment to ensure tracking and confirmation.

‍

In short, a purchase order initiates the buying process, while a delivery order executes the physical delivery.

‍

Four Types of Purchase Orders

Each type of purchase order serves a specific need depending on how much information is known at the time of the purchase. Understanding these helps streamline procurement and avoid delays or confusion.

‍

‍

1.Standard Purchase Orders (SPO)

Used for one-time purchases where all details - items, quantity, price, and delivery schedule - are clearly known and agreed upon in advance.

‍

2.Planned Purchase Orders (PPO)

Created when items and pricing are known, but delivery dates or quantities are uncertain. The procurement department typically monitors these releases to track order performance. Releases are made later as needed. 

‍

3.Blanket Purchase Orders (BPO)

Covers repeated purchases over a period of time. Quantities and dates aren’t fixed, but pricing and terms are agreed upfront.

‍

4.Contract Purchase Orders (CPO)

Establishes a long-term agreement with a vendor without specifying the actual goods or delivery schedule. Other POs refer back to this contract.

‍

Essential Terms and Concepts to Know Before You Begin

Before working with purchase orders, it’s helpful to understand a few key terms that frequently come up in the procurement process:

‍

Purchase Requisition: An internal request to begin a purchase. It usually precedes the creation of a PO.

‍

Three-Way Matching: A control method that compares the PO, invoice, and delivery receipt before payment is approved.

‍

Approval Workflow: A predefined process where the PO must be reviewed and approved by relevant stakeholders.

‍

Vendor Master Record: A centralized profile containing essential vendor details like tax info, payment terms, and contacts.

‍

Release Order: A follow-up order issued under a blanket or planned PO to authorize a specific delivery.

‍

Step-by-Step: How to Create a Purchase Order

Creating a purchase order involves more than just filling out a form. It’s a structured process that ensures financial control and clear communication with vendors. Each step in the process also reinforces internal control and audit readiness. 

‍

‍

1. Identify the Need: A department flags a requirement for goods or services, often starting with a purchase requisition.

‍

2. Get Internal Approvals: The requisition is reviewed and approved by the necessary stakeholders, such as department heads or finance. A clearly defined approval process helps prevent bottlenecks and unauthorized purchases. 

‍

3. Create the Purchase Order: A PO is generated with all key details - items, pricing, delivery address, and payment terms.

‍

4. Send PO to Vendor: The approved PO is shared with the supplier for confirmation and acceptance. Finance departments often oversee this exchange to ensure budget alignment. 

‍

5. Track Delivery: Once accepted, the vendor ships the items. The buyer monitors delivery against agreed terms.

‍

6. Verify and Match Documents: Goods received are matched against the PO and invoice through a three-way match process. This verification is often managed through accounting software to ensure payment accuracy. 

‍

7. Approve Payment and Close PO: Once verified, payment is made, and the PO is marked as complete in the system. This step is key to maintaining accurate purchase order management records. 

‍

Why Purchase Orders Matter

Purchase orders bring structure and transparency to the buying process. They help businesses control spend, avoid duplicate purchases, and ensure every transaction is properly documented. With a PO in place, teams reduce the risk of errors, missed deliveries, and payment disputes. It also streamlines communication between departments and vendors - ensuring that everyone is on the same page before money leaves the business. This consistency builds trust and strengthens supplier relationships over time. 

‍

How Spendflo Helps Streamline Purchase Order Workflows

Spendflo helps finance and procurement teams centralize their purchase order process - reducing manual effort, approval delays, and missed savings opportunities. Its purchase order software simplifies end-to-end workflows while enhancing visibility. From automated workflows to vendor negotiation support, Spendflo enables smarter buying decisions, ensures better visibility, and keeps your procurement process lean, fast, and efficient. 

‍

Frequently Asked Questions on Types of Purchase Orders

What are the different types of purchase orders used in procurement?

The four main types are standard, planned, blanket, and contract purchase orders. Each serves a unique purpose based on the level of purchase detail available.

‍

When should you use a blanket purchase order instead of a standard one?

Use a blanket PO when you need to make recurring purchases over time but don’t have exact delivery dates or quantities upfront.

‍

How do contract purchase orders work in long-term vendor agreements?

A contract PO outlines general terms and pricing with a vendor. Individual POs can then be issued under the contract as specific needs arise. A robust PO system ensures these contract references are properly tracked. 

‍