Purchase Order Process: A Step-by-Step PO Process Explanation

Shridhar Taparia
Jul 15, 2022·4 min

The need to establish a dependable, consistent process for producing, authorising, and monitoring purchase orders is an issue that firms in every industry encounter. The use of good procurement software may offset this. Still, to take charge of (and get insight into) their buying decisions, managers frequently look for ways to standardise and add accountability to their PO operations.

What is a Purchase Order (PO)?

A purchase order (PO) is a form that a customer fills out to authorise the purchase of products or services from a vendor or supplier. Purchases in the B2B environment typically include large volumes of significant transactions. A PO is a formal document that allows both parties to manage company purchases, enhance communication, lower financial risk, and strengthen relationships with suppliers. A procurement solution is generally used to ensure the information is consistent on both ends.

What Details Must Be Listed on a Purchase Order?

A purchase order is crucial because it provides the vendor with precise guidelines and instructions. Additionally, it gives the buyer official documentation of the precise terms of the contract while helping in preventing misunderstandings.

Every piece of information pertaining to the transaction is included in a purchase order, such as:

  • Specifications and required quantity of the goods
  • Contact details
  • The amount to be paid for the products or services
  • Dispatch date
  • Details and schedules for deliveries
  • Terms and conditions for payments
  • Tracking number for the PO

Step-by-Step Purchase Order Process

1. Requisition: The creation of the purchase order relies upon the creation and approval of an internal requisition before any purchases are made. The process of creating a purchase order can start as soon as the appropriate teams give their approval at this point.

2. Creation: Following the approval of the requisition, the buyer contacts vendors to negotiate the price, other terms of delivery, and the specifications for the necessary goods and services. The details that were agreed upon are then included in a purchase order.

3. Assurance/Approval: The vendor verifies the information & details of the order. The vendor accepts the order if everything is in order. A vendor also holds the right to refuse an order if there is an issue with the order information.

4. Documentation / Filing: It is usually a good practice for purchasers to document or file the order. If they are using E-procurement, this step is taken care of by the software. This makes it easier to cross-check information at a later stage and streamline purchases.

5. Delivery and Dispatch: The vendor ships the goods and waits for confirmation from the purchaser. At this stage, a quality check of the goods happens. If there is any discrepancy like damaged goods or missing items, the vendor is contacted.

6. Closure: The process of PO comes to a close with this step. The buyer’s finance staff authorises the vendor’s raised invoice. It’s forwarded to closure once the customer is happy with the order. The purchase process comes to an end once the money has been received.

The drawbacks of manually processing purchase orders

Maintaining manual purchase orders is expensive, ineffective, and time-consuming. It takes a lot of time to gather, store, and send them through the approval loop while ensuring they don’t get misplaced or harmed.

Guidelines for Optimizing your PO procedure

  • Review and Evaluate the Purchase Order Procedure - Every process in every company should be regularly examined and assessed for potential areas for improvement. Make sure to outline each phase, spot any bottlenecks and fix them, quantify the number of approvals needed, and consider all the variables that can impact your budgeting process.
  • Set Results That are Focused on Your Goals - Describe clearly the objectives for your purchase order procedure. Think of indicators relating to quick deliveries, dependable suppliers, or lower spending.
  • Make a List of Your Top Vendors - This list will make it easier for your team to choose swiftly from a short selection of vendors with whom your business has established dependable working relationships and negotiated for the best prices.
  • Create Expense Groupings and Budget Allowances - By automatically imposing purchase standards, these financial constraints contribute to streamlining.
  • Utilise Procurement Solution - It’s simple to standardise processes and replace repetitive tasks with automation by integrating a purchasing management system into your business’ PO process.


Developing a process that works for your team’s creation, tracking, and resolution of POs can significantly help in improving consistency, accuracy, and speed. For normal purchase order procedures, Procol’s automation services help segregate important documents, automatically scan pre-existing documents for vital data, and shorten turnaround times. As you start using Procol procurement software, you will see the purchase order process becoming free of error, information loss, and miscommunication. To know more, schedule a demo!

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