FREE Purchase Order Templates – Excel – Word

For every business, making the right purchases and keeping good inventory records are crucial to running a smooth and profitable business. However, buying the wrong goods or making costly mistakes can be accessible without a purchase order system. Inaccurate or inadequate records can also make tracking your inventory challenging, potentially resulting in out-of-stock situations or lost sales. Without it, you may also end up damaging your relationship with suppliers for wrong orders placed or wrong orders delivered, which may make you or your business be perceived as being unprofessional in your dealings.

It helps ensure that the suitable goods are delivered cost-effectively to the right place at the right time and doesn’t result in delays or decreased quality. It also ensures that you buy high-quality goods from reliable suppliers who can meet your requirements.

If you are looking to create or use a purchase order, you must understand all the key elements that must be included in the document. This article will take you through a purchase order template, how it works, the difference between a PO and an invoice, and how to properly format your order. We will also help you understand its different elements and guide you on how to create one using MS Word and Excel.

Using a premade purchase order template can help you save time and resources, especially when you are looking to create multiple purchase orders. For your convenience, we have created several purchase order templates you can download to use when creating your purchase orders. The PO templates are easy to use and customize and contain all the essential items that must be included in the purchase order.

Below are some of the different types of purchase order templates that you can download and use:

What is a Purchase Order?

A purchase order (PO) is a document sent to a supplier before an order is placed.

It includes the name and contact details of both the buyer and the supplier and information concerning the goods or services being purchased, quantities ordered, cost, and payment terms. Most businesses use PO to communicate what a buyer needs from a seller. The PO may also inform the seller how to fulfil the order, including handling the shipments. It also act as official contracts that protect the seller and the buyer should they encounter any issues while working to fulfil the orders.

 It is usually designed to help organizations manage their inventory and keep track of the purchases they have made.

The purchase order process is usually as follows:

• The buyer raises the purchase
• The PO is created, reviewed, and approved by the relevant people at the buyer’s end
• The vendor is then given the PO
• It is received and accepted by the vendor
• The vendor sends out the goods/services offered
• The invoice is created, issued, and settled by both parties involved

Below is a diagram of how the process evolves from the buyer’s end:

It can also help businesses avoid unexpected or uninformed price increments as each party has to work with the initially agreed prices, thereby avoiding interruptions in order fulfilment. They also help the buyers and sellers see every detail laid out and well documented, ensuring no miscommunication between the two.

Limitations of a Purchase Order

Once the supplier receives and agrees to the purchase order, it becomes legally binding. While it is beneficial in improving a business’s efficiency and effectiveness, particularly for large businesses, it can have some limitations for small businesses. For example, businesses with small cash reserves may find it challenging to fulfill huge orders or multiple orders that require colossal cash investment.

As a business owner, to avoid breaching the purchase order contract and to ensure that you turn away large purchase orders because of the cash required to fulfill specific orders, you should consider using PO financing solutions.

Its financing solutions, also referred to as PO financing, is an alternative financing solution between you (the vendor) and a third party (the financing company), where the third party agrees to pay for the goods or services on your order on your behalf.

Who Uses a Purchase Order?

PO financing solutions help small businesses and medium-sized businesses (SMEs) with limited cash reserves to meet their obligation. It also minimizes the risk of breaching a PO contract and provides flexibility regarding the payment schedule.

While everyone can benefit from a PO financing solution, it is commonly used by the following:

• Distributors
• Wholesalers
• Outsourcers
• Resellers
• Businesses with high seasonal sales
• Businesses with low cash reserves but high orders/need to purchase required materials before fulfilling purchase orders

How Does it Work?

The main idea behind purchasing through PO financing is to provide the same benefits to a business without increasing the risk of breaching a PO contract. As a business, it is crucial to understand how it works after reviewing your options before deciding on using PO financing.

First, you create a purchase order and send it to a PO financing lender. The lender then reviews the PO. The lender will pay the supplier for the PO if approved.

Once paid, the supplier will send the products to the customer. After the goods/services are delivered, you will invoice the customer. The customer will then pay directly to the PO financing lender, who will deduct their fees and send you the remaining balance.

Purchase Order Vs. Invoice

Although purchase orders and invoices are vital inventory management features and are often used interchangeably, they differ. PO are usually issued in advance, for a specific amount of inventory, for a specific period. At the same time, invoices are created and collected after a purchase detailing how much inventory was bought, how much was sold, and at what price and to whom.

By definition, a purchase order is a document that specifies what you want to buy, how much of it, and when you want the supplier to deliver it. Therefore, a PO becomes legally binding only after the supplier accepts it.

On the other hand, invoices record the goods and services purchased and the prices paid. They are typically issued at the end or near the end of a period. The seller usually creates invoices to bill for products and services already rendered to clients. The invoice should contain the PO number as a reference.

The significant difference between them is that invoice can only be created after the purchase order is approved, while it can be created before the invoice is approved.

Purchase Order Format

Although there is no one standard purchase order format that must be used when preparing a PO, the basic format should be as follows:

• Header: The PO header must contain the company name, address, purchase order date, and purchase order number.
• Supplier information: The supplier’s name, contact number, and recipient of the PO.
• Shipping address: The sender’s shipping address, shipping method, shipping terms, cost of shipping, and expected shipping date.
• Order details: The description of the goods or services being ordered, the quantity, unit to measure, price per unit, item name, product code or SKU-stock keeping number, and the extended price.
• Summary: The PO should be completed by providing the subtotal, applicable taxes, discounts, shipping costs, and the total.

Elements of a Purchase Order

All purchase orders must have the following essential elements to be valid. These elements include:

• Purchase order number
• Contact details for both the seller and the buyer
• PO date
• Shipping address and carrier preferences
• A shipping fee, tax, and other associated costs
• Payment terms
• PO details, including item number, quantity, price per unit, etc.
• Unique PO number for accounting and inventory usage
• Purchase terms
• PO submission date
• Order total
• Signature provisions for the parties involved
• Expected shipping date
• Additional terms and conditions for the fulfillment of the PO

Following are the types of purchase order:

Standard purchase order

For those looking to make one-off purchases, a standard purchase order is the most ideal as they contain the type of PO, items to be purchased, terms of payment, delivery date, and quantities.

Blanket purchase order

Blanket purchase orders are used for multiple purchases and items with a set price. It usually incorporate multiple potential PO into one. This is usually done to negotiate discounted prices. With a blanket PO, the items are usually included along with their quantity but maybe with or without the pricing. They are usually used when a company, for instance, is looking to buy a specific number of items from the seller but is unsure how often they will need to order.

Contract purchase order

Contract purchase orders are used for multi-variance purchases. They are one of the most commonly used and formal variations of a PO and offer the highest level of legal protection. They are usually created and issued by the buyer when they do not know which items they will order. Instead, the order sets to establish an understanding between the buyer and the seller for the delivery of specific items and quantities which will be defined in the future.

Planned purchase order

Planned purchase orders are used when the company plans to procure items for a particular time. Most of the order details are usually set out with a planned PO, including the item, price, and payment terms. The only detail that is usually not included in the planned PO is the delivery date. In a planned PO, the buyer understands the type of item they are looking to purchase, the quantity, and not the delivery date.  

For instance, the buyer can use a planned PO template for office supplies for six months but not know when each order should be delivered – (The order is delivered on a “need” basis).

There are many methods that you can use to create a PO. Two of the most common and straightforward ways to create one include using Excel and MS Word.

Below is a guide on how to create purchase orders using the two methods:

Using Excel

• Step 1: First, open Excel and create a new template.
• Step 2: Enter the basic item’s information. This includes the product’s name, measuring unit, and price per unit. You can also include details regarding the PO, such as a part number, description, or quantity purchased.
• Step 3: Create a heading for each agreement section at the top of your document. These include payment terms, date of delivery, and shipping instructions.
• Step 4: Enter the basic details of the order, including the total order amount, shipping instructions, and a list of required items.
• Step 5: Fill out any other information you require, such as the company name or contact information.

Using MS Word:

• Step 1: Open MS Word and Click on File on the MS Word ribbon.
• Step 2: Click on New and then the search tab, “Purchase Order Templates.” Select a template that best suits your needs, then click download.
• Step 3: Customize the contents of the PO template you downloaded by replacing the information with your specific details. You can include your company logo, motto/slogans. You can also include images and icons where necessary and add other details by clicking on the different areas in the template.
• Step 4: Proofread everything is okay, then save the file and print it.

As a business, having a purchase order template can help you meet your obligations and remain compliant with the contracts and laws. It is a document detailing what goods or services will be purchased and any specific requirements or requests from the purchaser to the seller. In addition, a PO can help maintain inventory levels, helping your business remain successful and profitable.

If you want to create a purchase order, a PO template can help ensure that your order is standardized. In addition, the templates can help streamline the process of creating a purchase order and eliminate the possibility of error or omission in the purchase order.