How to Create a Purchase Order, Step by Step
A purchase order records what you agreed to buy, from whom, in what quantity and by when. Eight steps to create one, only two of which are decisions — and the reason an open order belongs in your plan, not only in your accounting system.
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8 min readMost growing brands do not have a purchase order problem. They have a "what did we actually order, and when is it landing" problem — and the purchase order is where that answer is supposed to live. When it lives in a text thread with a supplier instead, every number downstream of it is a guess: weeks of cover, cash out the door next month, and whether to place the next order at all.
What is a purchase order?
A purchase order is a document the buyer sends a supplier that states what is being bought, how many, at what unit price, where it ships and when it is due. It is written before anything is produced or shipped, and that timing is the whole point of it.
Once the supplier accepts it, the order and their acceptance are generally treated together as an agreement. What counts as acceptance, and exactly what it binds, depends on your own terms and your jurisdiction — a question for a lawyer rather than a planning rule. What matters operationally is simpler: after acceptance, the quantity and the date on that document are the numbers everyone downstream is entitled to plan against.
That is also why a purchase order belongs in the plan and not only in the accounting system. An accepted, unreceived order is inventory you have committed cash to and cannot yet sell. Turning a forecast into exactly those commitments is most of what supply planning is.
What goes on a purchase order?
| Field | What it is | What goes wrong without it |
|---|---|---|
| PO number | A unique reference for this order, never reused | Two orders reconcile against one number and a receipt lands on the wrong one |
| Supplier and contact | Who you are buying from, and the person who answers | The order sits in a shared inbox that nobody owns |
| Ship-to address | The warehouse, 3PL or retail DC receiving the goods | Stock arrives where nobody is expecting it and the receipt is days late |
| Line items | SKU, description, quantity, unit price, extended price | The invoice cannot be matched, because there is nothing to match it against |
| Order date | The date the order was issued | Lead time cannot be measured, so the next order is timed on a guess |
| Due date | When the goods should be at the ship-to address | "Late" has no definition, so nothing is ever chased |
| Payment terms | Net 30, deposit on order, balance on shipment | Cash forecasting runs on assumption |
| Special instructions | Case pack, pallet configuration, labelling, lot and expiry marking | Freight or the retailer rejects the shipment on arrival |
Every row above is worth getting right, but only two of them — the quantity and the due date — are decisions. The rest is description. Brands routinely put their effort into the description and almost none into the two fields that carry the cost.
How do you create a purchase order, step by step?
- Establish the need. Inventory position drops toward its reorder point, or the plan surfaces a SKU that will run short inside the lead time. Position is on hand, plus on order, minus committed — not the number in the warehouse.
- Set the quantity. Forecast demand over the coverage window, then reconcile it against the supplier's minimum order quantity, case and pallet rounding, and what economic order quantity says about the trade-off between ordering cost and carrying cost.
- Set the order-by date. Work backwards from when you need the stock on the shelf, through everything lead time actually includes — production, quality release, freight, customs, receiving at the 3PL.
- Draft the document. SKUs, quantities, agreed unit prices, ship-to, due date, payment terms, and any packing or labelling requirement the receiving location enforces.
- Approve it internally. One named person signs off, against a threshold everybody knows. Approval is cheap; an unapproved order that arrives is not.
- Send it, and get acceptance in writing. Email, EDI or a supplier portal — the channel does not matter, the written acceptance does. An order the supplier never confirmed is not a commitment, it is a hope with a number on it.
- Receive against it. Count what arrived and record it against that order specifically, including short shipments and partials. A receipt with no order attached is how on-hand and on-order drift apart.
- Match and close. Compare the order, the receiving record and the invoice — the three-way match — and resolve the differences before payment goes out.
Which two fields actually cost money?
The quantity
Order too little and you stock out, which costs the margin on the units you could not ship and, worse, teaches your own sales history that demand was lower than it really was. Order too much and you have converted cash into stock that pays rent until it sells, or expires first if you sell anything perishable.
The forecast is the input to this decision, not the answer to it. Supplier constraints move the number afterwards: a minimum order quantity, a case pack, a full container, a price break that only pays for itself if the extra units sell within their shelf life.
The order-by date
The date is the field brands under-think, and it is usually the one that hurts. The quantity can be adjusted later; a date you missed cannot.
For example: your supplier quotes 10 weeks from purchase order to your dock, you re-order every 4 weeks, and you want 3 weeks of buffer. The order you place today has to cover demand roughly 17 weeks out, which is a very different forecasting problem from the one most brands think they are solving. Shortening any part of that chain does more for service than a better forecast usually does.
How do you track a purchase order after it is sent?
An order moves through a sequence of statuses, and the value is not in the labels — it is in somebody actually moving them:
- Draft — created, not yet sent
- Submitted — sent to the supplier, not yet confirmed
- Confirmed — the supplier has accepted quantity, price and date
- In transit — the goods have shipped
- Partially received — some units are on your shelf, the rest are still owed
- Received — the full quantity has landed
- Closed — received and matched against the invoice
- Cancelled — killed before fulfilment
Two habits make this worth maintaining. Compare the promised date against the actual receipt date on every order, because that difference is your real lead time and the input to every future order-by date — the same data that drives dealing with a supplier who is late. And clear out stale orders: anything sitting confirmed long past its due date is either a delivery nobody is chasing or a backorder waiting to happen, and both are worse when they are discovered by a customer.
What is the difference between a purchase order and an invoice?
The two documents describe the same transaction from opposite ends.
| Purchase order | Invoice | |
|---|---|---|
| Direction | Buyer to supplier | Supplier to buyer |
| Asks for | Goods | Payment |
| Issued | Before the goods ship | After they are delivered |
| Written by | You | Them |
Because both describe the same transaction, they should agree — and the point of matching them against the receiving record is that when they disagree, you find out before the money leaves.
Where Planster fits, and where it doesn't
Planster pulls sales and inventory from 150+ systems and builds one demand forecast across DTC, Amazon, retail and wholesale, then nets it against what is on hand, on order and already committed. That is the engine, and it produces the two fields on this page that are actually decisions: an order quantity that already accounts for minimum order quantities, case rounding and lead times, and an order-by date. You adjust what you want to adjust — round it to a container, push it a week, split it across two suppliers — place the order from Planster, and track inbound shipments by status to the dock, where the on-order quantity nets back into position automatically.
On top of that, the overnight run re-checks every SKU, order and channel and brings you a ranked list in the morning with the purchase orders already drafted against it. You change what you want changed and approve. Nothing reaches a supplier until you do. Plan, the full app, is $999/month, for consumable CPG brands, manufacturers and co-manufacturers between $50M and $500M — food, beverage, supplements, beauty, household goods.
Where it does not help: invoice matching and payment stay in your accounting system, so the third leg of the three-way match is not something you will do here. It will not set the first order for a product with no sales history, because there is nothing to forecast from. And if you buy a handful of SKUs from one supplier on a predictable cycle, the process on this page is genuinely a spreadsheet job. See purchase orders in the product for how the constraints are applied, managing orders from creation through receipt for the operational detail, and pricing for the whole number on one page.