---
title: "What is purchase order?"
description: "Purchase Order explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/purchase-order/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is purchase order?

Glossary

A purchase order is a formal document a business sends to a vendor listing exactly what it wants to buy, the agreed price, and quantity, before the vendor ships the goods or performs the service.

Updated September 2026

## How purchase order works

A purchase order is created and approved internally before it is sent to the vendor, which gives the business a chance to confirm the purchase is authorized and budgeted for. Once the vendor accepts it, the purchase order becomes the reference point for everything that follows, the shipment, the invoice, and the payment.

When the vendor's invoice arrives, it is checked against the original purchase order to confirm the price and quantity match what was agreed. Any difference, like a higher price or a smaller quantity delivered, gets flagged before the bill is paid, which helps prevent overpayment and unauthorized purchases.

## Example

A construction company issues a purchase order for 500 units of lumber at $8 each, for a total of $4,000. The vendor delivers 500 units and invoices exactly $4,000. Because the invoice matches the purchase order in both price and quantity, the bill is approved for payment without further review.

## Purchase order in QuickBooks Online vs Xero

QuickBooks Online lets you create purchase orders and convert them directly into a bill once goods are received, keeping the two linked. Xero offers a similar purchase order feature that can be copied into a bill, with the option to track items as ordered, billed, or received.

## Common mistakes

- Staff place orders verbally or by email without issuing a purchase order first, leaving no documented authorization to check the vendor's invoice against later.
- A purchase order is approved at one price, but the vendor raises the price before delivery, and nobody updates the purchase order to reflect the change.
- Purchase orders are created but never closed out after the bill is paid, leaving open commitments on the books that overstate what is still outstanding.

## Why it matters

A purchase order is the control that stops spending from happening before it is authorized and budgeted. Without one, a business has no documented basis to dispute an incorrect vendor invoice, and owners lose visibility into commitments that have not yet hit the books as a bill. For a growing business managing cash carefully, purchase orders prevent overpayment and keep spending aligned with what was actually approved.

## Related terms

- [Three-way match](https://ledgerbpo.com/glossary/three-way-match/)
- [Accounts payable](https://ledgerbpo.com/glossary/accounts-payable/)
- [Invoice](https://ledgerbpo.com/glossary/invoice/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles purchase order

We create, track, and match purchase orders against vendor invoices before anything gets approved for payment, catching pricing and quantity errors early. A dedicated accountant keeps the purchase order log current so nothing gets paid twice or without authorization. You get tighter control over spending without slowing down your team.

[POs raised, matched and received](https://ledgerbpo.com/services/purchase-order-processing/)

Next step

## Books closed. Invoices paid. Every month.

Tell us what is going on with your books or billing. You will hear from a named person within 1 business day, with a custom quote and a plan for the first close.

- Reply from a named person within 1 business day
- No setup fee, month-to-month
- Your software, your data, no lock-in

Start with a custom quote

[Get a custom quote](https://ledgerbpo.com/get-a-quote/) [Book a 20-minute call](https://ledgerbpo.com/book-a-call/) Or call [+1-657-777-0006](tel:+16577770006) during US, UK or Australian business hours.

---

Source: https://ledgerbpo.com/glossary/purchase-order/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt