Purchase orders: Complete UK guide for procurement teams

While simple in concept purchase orders (POs) play a critical role in procurement by standardising buying, enforcing policy, improving visibility and strengthening audit readiness. 

For UK procurement teams a strong PO process helps reduce unapproved spend, clarify responsibilities and create a full audit trail for financial and operational reporting.

What is a purchase order?

A purchase order is a legal document issued to a supplier to confirm the buyer’s commitment to purchasing specific goods or services. It includes any agreed quantities, prices and delivery terms.

For procurement and accounts payable teams POs are essential for managing cash flow, ensuring payment accuracy and streamlining purchases.
 

How POs formalise buying between organisations and suppliers

Purchase orders consolidate all the key details from a commercial transaction into a single document that both the buyer and supplier can reference. When the supplier accepts the PO, it becomes a legally binding agreement that protects both parties. The buyer secures pricing and availability, and the supplier has written confirmation that the goods or services will be paid for upon delivery.

By establishing a formalised method for purchasing POs create accountability. A standardised purchase order prevents buyers from claiming they ordered different quantities and stops suppliers from changing their pricing retrospectively.
 

Why POs matter for controlling spend and adhering to compliance

Purchase orders offer insights into company spend before invoices arrive, allowing your organisation to manage budgets in real time. They help enforce company purchasing policies thanks to embedded approvals when they are factored into your PO process.

POs also create a trail for auditors and internal stakeholders. From a compliance perspective this means traceability for every purchase ensuring all spending aligns with UK procurement legislation.
 

Common PO terminology

• PO number: a unique number assigned to each purchase order for identification and tracking purposes

• Line items: the individual goods or services requested by the buyer including description, quantity and price

• Delivery terms: how, when and where the goods or services will be delivered

• Payment terms: when and how the buyer will make payment to the seller

• Ship-to address: the physical location where the supplier should deliver the goods or services

• Bill-to address: the physical location where the supplier should send the invoice.
   

Purchase order process

The PO process is a controlled workflow for purchasing goods and services that ensures compliance with internal policies and government legislation. Monitoring this workflow with automated systems like Amazon Business helps you identify inefficiencies and optimise processes.

A typical purchase order process looks like this:

1. Purchase requisition and approval

2. Purchase order generation and dispatch

3. Supplier acceptance and confirmation

4. Goods or services receipt

5. Three-way matching

6. Payment and reconciliation.
    

Requisition and approval 

When an employee identifies a business need they submit a purchase requisition detailing requirements, reasons and costs to the appropriate stakeholder for approval.

When you embed approvals directly into your buying process employees are automatically guided towards authorised suppliers and contract terms. This makes it easier to ensure buyers spend in line with your policies. Automated purchase order solutions like Amazon Business offer in-built controls that automate approval routing.
 

PO creation and dispatch

Once approved a formal purchase order is generated either automatically using a digital purchase order solution or manually by entering details into a template document. Your team assigns a unique purchase order number to the PO for tracking then sends it to the supplier.
 

Supplier acceptance and confirmation

The supplier receives and reviews the purchase order then accepts the terms or requests amendments. Once the purchase order is accepted the supplier prepares and delivers the requested items to the ship-to address.
 

Goods or services receipt

A receipt process is triggered when the buyer receives the goods or services. At this stage the delivery is validated against the original purchase order. Your receiving team verifies that all quantities and items are correct and undamaged.
 

Three-way matching

Three-way invoice matching involves comparing a purchase order against its delivery receipt and invoice to verify their accuracy. It prevents payment errors and ensures your suppliers are paid for exactly what was delivered. Modern invoicing solutions provide built-in matching and approval workflows to support faster payments and adhere to policies.
 

Payment and reconciliation

Once you’ve completed a three-way match the invoice is ready to be scheduled for payment as per the agreed payment terms. Your finance team processes the payment and the completed purchase order, receipt and invoice then become part of the procurement record available for audits or internal referencing.
 

Why purchase orders matter

In addition to complying with policies the benefits of purchase orders include enhanced risk management, productivity and cost control.
 

Reducing maverick spend

Maverick spend undermines negotiated contracts leaving you vulnerable to inflated costs and inaccurate forecasting. Recent studies found that 93% of procurement leaders consider indirect costs a major problem with 87% reporting an annual increase in maverick spend.

Purchase orders enable you to control expenditure and enforce adherence to company policies. They provide visibility into spending before it happens, and when using POs for all purchases becomes company policy, employees can’t bypass the procurement process.
 

Improving auditability and financial accuracy

Purchase orders establish a documented audit trail demonstrating that your spending followed the correct authorisation process and that all payments match received goods. For heavily regulated industries and organisations undergoing audits this is crucial.

By preventing duplicate payments and additional charges POs also improve financial accuracy. They ensure you never pay more than what’s owed or pay for goods that were never received.
 

Supporting budget tracking and cost control

An efficient purchase order process makes budget management simpler and scalable. Purchase orders enable proactive budget tracking and cost control by allowing you to log committed spend against the relevant budget. This gives finance teams real-time visibility into both actual and committed costs.

With the right procurement solution your team can set custom spending limits and automatic alerts and reallocate resources as needed. This creates room for strategic investment leading to accelerated business growth.
 

Improving supplier communication and fulfilment accuracy

Purchase orders give suppliers clear written instructions detailing exactly what to deliver, when to deliver it and where it’s going. This minimises the risk of fulfilment errors and allows suppliers and buyers to track orders more easily.

POs also improve communication by consolidating all important order details into a single document. This saves you from multiple emails or phone calls. If questions about the order come up later both parties can reference the PO to resolve matters.
 

Types of purchase orders

There are four different types of purchase orders: standard, blanket, contract and planned.
 

Standard POs

Standard purchase orders are the most common type of PO. They’re used for one-time purchases and include all the details of a single order. Standard POs work well for non-recurring purchases such as equipment or one-off services.
 

Blanket POs

Blanket purchase orders consolidate multiple deliveries over an extended period into a single order. They work well for recurring purchases from the same supplier. Instead of creating individual POs for each transaction the buyer sends a blanket PO to reduce administrative overhead.
 

Contract POs

Contract purchase orders reference a specific supplier contract where terms, pricing and conditions are already specified. Individual POs are issued against that contract specifying quantities, delivery dates and billing details to ensure consistent terms across the organisation.
 

Planned POs

Planned purchase orders are commitment-free documents that outline future purchase intentions to help suppliers plan inventory and production. They typically include estimated quantities and delivery timeframes. Planned POs are converted into standard or blanket POs after the predicted needs are confirmed.
 

POs vs invoices vs requisitions

Understanding the differences between commonly associated terms will help you avoid errors and clarify the role of each document in the procurement process.
 

PO vs invoice

Purchase orders are issued by buyers and represent their commitment to purchasing goods or services under specified terms. They precede invoices and set expectations for what will be delivered including details like price, quantity and specifications.

Invoices on the other hand are issued by suppliers. They’re requests for payment after a PO has been received and the relevant goods or services have been delivered.
 

PO vs requisition

Purchase requisitions are internal documents that express a need for goods or services while purchase orders are a commitment to fulfil that need via a supplier. Once approved a purchase requisition leads to purchase order creation.
 

Common PO challenges

Despite purchase orders providing many benefits ineffective or improper management of POs can result in operational challenges that drive up costs and stifle productivity.
 

Slow approval cycles

Slow approvals result in delayed purchases that negatively impact project timelines. They often stem from unclear delegation, and queues form when there are multiple layers of approval or a lack of automation in the approval process.
 

Manual errors and inconsistent formats

When purchase orders are created manually the risk of errors and formatting inconsistencies increases. Wrong quantities, pricing or line items lead to delays and slow correction cycles. Inconsistent PO formats make processing difficult and can result in critical information being omitted.
 

Incomplete supplier details

Missing contact information, incorrect addresses and inaccurate payment terms result in processing delays that create bottlenecks for your team. This frequently occurs when supplier information is not centralised and verified in a shared PO system.
 

Poor visibility of order status

Without proper tracking your team can’t easily determine the status of a purchase order. As a result finance can’t predict when invoices will arrive and procurement lacks the insight to share updates with stakeholders.

Poor PO visibility is often a symptom of fragmented purchasing across tools and teams. When purchasing happens through multiple systems your teams lack the necessary oversight to avoid duplicate spending. Choosing a solution like Amazon Business improves transparency without changing core finance systems by enabling a centralised view of purchase commitments and delivery status.
 

How to improve your PO process

To improve your purchase order process you need to address three critical areas: people, systems and policies.
 

Standardise approval workflows

Establish clear approval rules based on objective criteria such as purchase value, budget availability, requestor role and category type. Automated systems help route purchase orders to the correct approver according to pre-defined rules.
 

Use automation to reduce manual entry

Purchase order automation minimises manual data entry with faster PO creation, approval routing and exception flagging. This functionality reduces the risk of errors and significantly shortens processing times.

You can further streamline the purchasing process by integrating with your suppliers’ systems, so you can transmit POs and receive acknowledgements in real time.
 

Improve cross-team collaboration between procurement, finance and operations

Collaboration eliminates inefficiencies and allows all stakeholders to get the visibility they need. When everybody has access to the same data you can identify and resolve issues quickly.

Standardise approval processes and use shared systems for communication. Purchase order system features like split charges enable finance teams to allocate purchases across cost centres efficiently. Meanwhile compliance management tools ensure spending adheres to organisational policies.
 

Track purchase order KPIs

Measuring the performance of your PO process helps you find and capitalise on improvement opportunities. Keep track of the following purchase order metrics:

• PO cycle time: the duration from requisition submission to PO delivery

• Match exception rate: the percentage of invoices that fail the three-way matching process

• Maverick spend: the percentage of company spend occurring without POs

• PO accuracy rate: the percentage of purchase orders requiring no amendments.

Regularly report on these metrics and share the results with your organisation. This supports initiatives that improve your processes and gives teams targets to benchmark against.
 

Buying with visibility and consistency

Purchase orders provide the transparency, compliance and accuracy organisations need to effectively manage company expenditure. A healthy process balances control with efficiency, preventing unauthorised spending without slowing down operations.

Effective purchase orders work by relying on visibility and consistency. The key to success lies in developing a purchase order process that works for your organisation’s scale and complexity. Learn how Amazon Business can help your organisation achieve this.