Purchase order (PO)
The purchase order closes the project's procurement cycle: it starts from a requisition (the internal request for material) and turns into the formal commitment with the supplier. It spells out each line item —description of the supply, unit, quantity, unit price and amount— along with billing details, place and date of delivery, payment terms and, where applicable, taxes and freight.
Its main purpose is spend control and traceability. By issuing a PO with prices that were quoted and approved beforehand, the project avoids buying at figures different from those budgeted and creates a document against which to check the material received (delivery note) and the invoice. It is the basis of the three-way match: purchase order, receipt and invoice must all agree before the supplier is paid.
In construction, the PO links cost control to cash flow: the sum of the purchase orders placed represents the commitment already incurred, even though not all of the material has been paid for or received yet. That is why tracking open POs lets you anticipate variances against the project budget and know how much material is still due to arrive at each work front.
Example
A project needs 400 bags of cement at $210 each. A PO is issued to the supplier for $84,000 plus tax, with delivery to the site in three partial shipments and payment at 30 days. As each batch arrives, the delivery note is checked against the PO; if the invoice comes in for 400 bags at $210, all three agree and payment is approved.
| Order | Supplier | Material | Amount | Delivery | Status |
|---|---|---|---|---|---|
| OC-2026-0148 | THThe Home Depot | Concrete f'c=250 | $184,000 | Lun 30 | In transit |
| OC-2026-0147 | CConstrualcalde | Rebar #4 | $96,000 | Lun 30 | Approved |
| OC-2026-0146 | CConstrurama | Red brick | $71,400 | Mar 1 | Delivered |
| OC-2026-0145 | CConstrualcalde | Gray cement | $28,000 | Dom 29 | Delivered |
| OC-2026-0144 | SSodimac | Electrical | $42,500 | Vie 27 | Delivered |
Frequently asked questions
What is the difference between a requisition and a purchase order?
The requisition is the internal request for material made by the project (what it needs and when); the purchase order is the formal document sent to the supplier to buy it, with prices and terms already approved. The requisition is internal; the PO is external and binding.
What information should a purchase order include?
The PO number and date, the supplier's and the company's details, a description of each line item with unit, quantity, unit price and amount, the subtotal, taxes and total, plus the delivery terms (place and date) and the payment terms.
Is a purchase order a binding document?
Yes. Once the supplier accepts it, the purchase order constitutes a commercial agreement that obliges them to deliver the goods under the agreed conditions and to be paid according to what was agreed.