A purchase order, or PO, is a written order you send to a supplier listing what you want, how many, at what rate and on what terms. Once the supplier accepts it, it is the agreement both sides work from.
Many small businesses order by phone or WhatsApp and only see the terms when the bill arrives. The bill then becomes the agreement, and the bill is written by the supplier.
01What goes wrong without a PO
- Rates drift
- The supplier bills at a new rate you never agreed to, and nobody notices.
- Quantities differ
- You asked for 200 bags and 220 arrived, with a bill for 220.
- Wrong items
- You wanted 8 mm TMT bars and got 10 mm.
- Nobody knows what is on order
- Two people order the same thing, or nobody does.
- Payment disputes
- The supplier says 30 days, you remember 45, and there is nothing written down.
- No control over spending
- Anyone who can phone a supplier can commit the business's money.
02What a PO should contain
| Field | Example |
|---|---|
| PO number and date | PO/26-27/0187, 28 October 2026 |
| Supplier name, address, GSTIN | Shreeji Steel Traders, Bhavnagar, 24ABCDE1234F1Z5 |
| Delivery address | Your godown or site address |
| Items, with clear descriptions | TMT bar Fe 500D, 10 mm |
| Quantity and unit | 4.5 tonnes |
| Rate and tax | ₹54,200 per tonne plus GST at 18 percent |
| Delivery date | By 4 November 2026 |
| Payment terms | 30 days from receipt of goods |
| Other terms | Mill test certificate with each lot; freight paid by supplier |
Be specific in the description. "Tiles" leads to arguments. "Vitrified tile, 600x600 mm, glossy, design GVT-2041, grade premium, 4 pieces per box" does not.
03Who approves
Decide who can raise a PO and who approves it. A common pattern:
- A store or purchase person raises
- the PO from the reorder list or a request from the shop floor.
- The owner or a manager approves
- it before it goes to the supplier.
- Approval limits by value
- a supervisor can approve up to ₹25,000, a manager up to ₹2 lakh, the owner above that.
In a five-person business the owner raises and approves everything. That is fine. The point is that each order exists in writing before it is placed.
04Sending and confirming
Send the approved PO by email or WhatsApp as a PDF, and ask the supplier to confirm. Confirmation can be a reply saying "Accepted", or the supplier's own order acknowledgement. If the supplier changes the rate or the date when confirming, update the PO and approve it again.
05Receiving against the PO
When goods arrive, check them against the PO, line by line:
- Is it the right item,
- as described?
- How many arrived,
- and how many are damaged or wrong?
- Has it come before the delivery date?
Record what you received and what you rejected. A goods received note (GRN) is the usual name for this record. If only part of the order arrives, the PO stays open for the balance.
06Paying against the PO
When the supplier's bill arrives, match it to the PO and the goods received before paying. This is called three-way matching, and it catches most billing errors. See three-way matching.
07Payment terms and MSME suppliers
Write the payment term on every PO. If the supplier is a micro or small enterprise registered on Udyam, the agreed term cannot be more than 45 days from acceptance of the goods, and paying late has income-tax consequences for you as the buyer. See MSME payments and the 45 day rule.
08Examples by size
- A kirana or small shop
- a PO may be a WhatsApp message in a fixed format, saved in one place, with the distributor's reply.
- A 20-person manufacturer in Rajkot
- POs for all raw materials, bought-out parts and job work, approved by the owner, with GRNs at the gate.
- A 150-person company
- POs from a purchase department, with approval limits, a list of approved suppliers and rate contracts agreed once a year.
09Purchase requests from the shop floor
In a factory or a business with several departments, the people who need materials are not always the people who buy them. A short purchase request, with the item, quantity, the date needed and the job or machine it is for, lets the purchase person combine requests, check stock and raise one PO to the right supplier.
In a typical Rajkot machine shop, the maintenance team, the production supervisor and the owner may all order cutting tools from the same supplier, each on the phone. One request form and one weekly PO turn many small orders into a few larger ones, which also gives you a case for a better rate on the combined quantity.
10Open POs
Review open purchase orders every week. An open PO is a promise of goods and a future payment. Old open POs for goods that never came should be closed, so they do not get delivered and billed months later when you no longer need them.
11Rate contracts
For items you buy every month, such as packaging, cement or chemicals, agree a rate for a period, such as a quarter, with the supplier. Each PO then refers to the rate contract. It saves negotiating every order and makes rate checking simple.
In MatruOS, you create a purchase order, get it approved, send it to the supplier, and record goods received against each line with received and rejected quantities.