The Purchase Order Process: From Requisition to Payment
A purchase order (PO) is the formal document that turns a buying decision into an enforceable instruction to a supplier. Following the full process – not just the paperwork – keeps procurement controlled and payments accurate.
1. Requisition
An employee raises a purchase requisition describing the need: what, how many, and the estimated cost. This is an internal request, not yet an order to any supplier.
2. Approval
The request is checked against budget and policy. Approval authority scales with the amount – bigger spends need higher sign-off.
3. Supplier Selection and PO Issuance
Choose the supplier (often via quote or tender), then issue a numbered PO with quantities, prices, delivery dates, and terms. The supplier accepts and the contract is formed.
4. Delivery and Receipt
Goods arrive and are checked against the PO. A goods receipt note records what was actually received.
5. Three-Way Match and Payment
The supplier invoice is compared to the PO and the goods receipt. Only when all three agree is the invoice approved for payment. This match stops overbilling and duplicate payments.
Issue supplier-ready purchase orders with the free Purchase Order Generator, and master the matching step with our three-way matching guide.
Frequently Asked Questions
Who approves a purchase order?
Approval usually follows your internal authority rules – a manager or department head for routine purchases, plus finance sign-off for larger amounts. The approver verifies the budget and the business need.
What is the PO lifecycle?
The lifecycle runs from purchase requisition, through approval and issuance to the supplier, to delivery and goods receipt, then three-way matching against the supplier invoice before final payment.
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