Purchase Order Template: Free PO Form and How Purchase Orders Work

A purchase order template is a ready-made form a buyer fills in to order goods or services from a supplier, setting out the items, quantities, agreed prices, delivery date and a unique PO number. Once the supplier accepts it, the purchase order becomes the reference the supplier must quote on their invoice. In Australia, many government agencies and large companies will reject or hold an invoice that doesn't show a valid PO number, so getting this one detail right is often the difference between being paid in 20 days and waiting months.

What is a purchase order?

A purchase order (PO) is a document the buyer sends the supplier to place an order. It lists what is being bought, how many, at what price, where and when it should be delivered, and on what payment terms. It's issued by the buyer, which is the key difference from a quote or invoice, both of which come from the supplier.

For the buyer, a PO is an internal control: someone with authority approves the spend before it happens, and accounts payable can check later invoices against it. For the supplier, an accepted PO is written confirmation of exactly what was ordered, which protects you if the customer later disputes the price or quantity.

How does the purchase order process work?

The purchase order sits between the quote and the invoice. The supplier quotes, the buyer issues a PO based on that quote, the supplier delivers and invoices against the PO, and the buyer pays once the documents match.

1. Quote. The supplier sends a quote with prices and scope. Our guide to writing a quote covers what to include.
2. Purchase order. The buyer raises a PO matching the quote, gets it approved internally, and sends it to the supplier.
3. Acceptance. The supplier checks the PO against the quote and confirms it, ideally in writing.
4. Delivery. The supplier delivers the goods or completes the work. The buyer records receipt, often with a goods received note.
5. Invoice. The supplier issues a tax invoice quoting the PO number.
6. Three-way match and payment. The buyer matches the PO, the delivery record and the invoice, then pays.

What is a three-way match, and why do invoices get rejected?

A three-way match is the check an accounts payable team runs before paying: the purchase order, the goods received record and the supplier's invoice must agree on the items, quantities and prices. If any one of the three doesn't match, the invoice is usually put on hold or sent back, and the payment clock stops.

The most common reasons a supplier's invoice fails the match:

• No PO number on the invoice, or the wrong one.
• The invoice total is higher than the PO, even by a small amount for extra materials or a call-out fee.
• Line items described differently from the PO, so the system can't pair them.
• Invoicing for more than was received, for example before a partial delivery is complete.
• The PO has expired or been fully used by earlier invoices.
• The invoice is addressed to the wrong legal entity or ABN.

If the scope changes mid-job, ask the buyer for a PO variation before you invoice the extra. It's much quicker than arguing about a rejected invoice later.

Why do government and corporate buyers require a PO number on invoices?

Large organisations use PO numbers to tie every payment to an approved budget, and their systems often can't process an invoice without one. Many Australian government agencies and large companies state in their supplier terms that invoices without a valid PO number will be returned unpaid.

For Commonwealth government work, the payment clock depends on a correct invoice. Under the Department of Finance's Supplier Pay On-Time or Pay Interest Policy, non-corporate Commonwealth entities must pay suppliers on contracts covered by the policy within 20 calendar days of receiving a "correctly rendered" invoice and acknowledging delivery, or within 5 days where both parties use Peppol eInvoicing. An invoice missing the PO reference the agency asked for is unlikely to count as correctly rendered.

How to put a PO number on an invoice

Show the PO number near the top of the invoice, next to your invoice number and date, labelled clearly: "Customer PO: 4500012345". Copy it exactly, including any prefix or leading zeros, and use the same line descriptions as the PO. If one invoice covers several POs, list each PO against its own lines. Everything else a tax invoice needs is covered in how to write an invoice.

Is a purchase order a tax invoice?

No. A purchase order is the buyer's request to buy, so it can't be a tax invoice, and the buyer can't claim GST credits from it. GST credits come from the supplier's tax invoice issued after the supply. A PO can show GST so the buyer knows the total commitment, but that figure is an estimate, not a tax document.

The exception is a recipient-created tax invoice (RCTI), where the buyer issues the tax invoice on the supplier's behalf under an agreement that meets ATO requirements. That's a separate arrangement and a PO alone doesn't create one. The ATO's tax invoice guidance covers the details.

Purchase order vs invoice vs quote: what's the difference?

A quote is the supplier's offer, a purchase order is the buyer's acceptance and order, and an invoice is the supplier's request for payment after delivery. Each one comes at a different point and from a different side of the deal.

For the supplier-side documents, see our comparison of invoices, quotes and receipts.

Purchase order template you can copy

Use this if you're the buyer and need a simple PO, or if you're a supplier and want to give a small customer a format to send you. Replace everything in brackets.

Check the maths before you send it. In this example the line totals are $450 + $360 + $380 = $1,190, GST at 10% is $119, and the total commitment is $1,309. The supplier's tax invoice should come to the same figure if everything is delivered as ordered.

Do small businesses need purchase orders?

Most sole traders and small businesses don't need to issue purchase orders for their own buying; a written quote accepted by email does the same job. Where POs matter is when you're the supplier and your customer is a government agency, a large company or a head contractor, because their systems run on them.

Practical rules when a customer uses POs:

• Don't start work without the PO if the customer requires one. Ask for it in writing before you order materials.
• Check the PO against your quote on receipt. Flag any difference in price, quantity or scope straight away.
• Read the terms on the back. Large buyers often attach their own conditions, including payment terms that override yours.
• Invoice exactly what the PO says, or get a variation first.
• Keep the PO with your copy of the invoice. If payment is late, the PO is your proof of what was agreed.

Purchase orders and Peppol eInvoicing

Peppol is the eInvoicing network the Australian Government has adopted, and it sends invoices directly between accounting systems instead of by email. A Peppol invoice has a dedicated order reference field, which is where the PO number goes, so the buyer's system can match it automatically. That automatic matching is a big part of why Commonwealth agencies commit to 5-day payment for eInvoices.

If you supply government or large corporate customers, it's worth asking whether they accept Peppol invoices. Our guide to eInvoicing and Peppol in Australia explains how to get set up.

This article is general information, not legal or tax advice. Buyers' supplier terms vary, so always read the conditions attached to a purchase order. For general guidance see business.gov.au and the ATO.

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