# Purchase Order (PO)


A purchase order (PO) is a buyer's official offer to purchase goods, listing items, quantities, prices, delivery dates, and ship-to location. It becomes a binding contract once the seller accepts it. In EDI it is the 850 transaction, the document that starts most B2B order flows.

## What a purchase order includes

A PO carries a PO number, the buyer and ship-to addresses, line items with SKU or GTIN, quantity, unit price, requested ship and delivery dates, and payment terms. The PO number threads through the whole order-to-cash cycle: the acknowledgment, the advance ship notice, the invoice, and the three-way match all reference it.

## Paper, email, and EDI purchase orders

Large retailers send purchase orders as EDI 850s straight into your system. Smaller buyers still send POs by email, PDF, or spreadsheet, which is where manual keying and errors creep in. Handling EDI and document orders in one pipeline keeps every PO structured and out of someone's inbox.

## Types of purchase orders

Buyers use different PO types depending on how much they know about quantities and dates up front.

| Type | What is fixed | Typical use |
| --- | --- | --- |
| Standard PO | Items, quantities, prices, delivery dates | One-time or regular replenishment orders |
| Planned PO | Items and prices; dates are estimates | Scheduled deliveries released later |
| Blanket PO | Pricing and terms over a period; quantities released as needed | Repeat purchases of the same items |
| Contract PO | Terms and conditions only | Framework that later POs reference |

## Purchase order example

A typical B2B purchase order carries these fields. The values below are an illustrative example.

- PO number: 4500118273
- PO date: 2026-09-14
- Buyer: Example Foods Co., Accounts Payable
- Ship-to: Distribution Center 6094
- Line 1: 120 CS of item GTIN 10012345678902 at $18.40 per case
- Requested delivery date: 2026-09-28
- Payment terms: 2% 10, Net 30
- Freight terms: FOB destination, freight prepaid
- Authorized by: Purchasing Manager

## The purchase order lifecycle

Each step after the PO references the PO number, which is why a wrong or missing PO number causes invoice rejections downstream.

- The buyer raises and approves the PO, often from a purchase requisition.
- The PO goes to the supplier as an EDI 850, an email, or a PDF.
- The supplier enters it as a sales order and confirms it with an acknowledgment (EDI 855).
- Any change to quantities or dates goes out as a PO change (EDI 860).
- The supplier ships and sends an advance ship notice (EDI 856).
- The supplier invoices (EDI 810).
- The buyer runs a three-way match of PO, receipt, and invoice, then pays, often with remittance advice (EDI 820).

## FAQ

### What is a purchase order in EDI?

In EDI, a purchase order is the 850 transaction set. The buyer's system sends it electronically and the supplier's system turns it into a sales order, ideally with no manual re-keying.

### What is the difference between a purchase order and an invoice?

A purchase order is the buyer's order placed at the start of the transaction. An invoice, the EDI 810, is the seller's bill sent after the goods ship. The PO authorizes the purchase; the invoice requests payment.

### What is a PO number?

A PO number is the buyer's unique reference for a purchase order. Suppliers must quote it on the acknowledgment, ship notice, and invoice so the buyer can match and pay.

### What is the difference between a purchase order and a sales order?

The buyer creates the purchase order to request goods. The supplier creates a sales order from it to fulfill the request. They describe the same deal from opposite sides.

### Is a purchase order legally binding?

A PO is an offer. It becomes a binding contract once the supplier accepts it, either with an acknowledgment or by shipping the goods.

## Sources

- [ASC X12 standards body](https://x12.org)