It’s tempting to order inventory in advance just in case you sell out. But businesses are sitting on $1.40 worth of inventory for every dollar in sales—a type of bloating that can happen for many reasons. One of them is losing track of orders you’ve made to suppliers, leaving you with high inventory levels and storage costs to match.
Creating and tracking purchase orders is one way to reduce this problem.
A good purchase order system makes it easier to forecast demand and order future stock, improve cash flow, and prevent any order errors that arise throughout the order process.
Read on to learn what a purchase order is, how to create one, how to manage purchase orders, and to download a free PO template.
What is purchase order management?
A purchase order (PO) is an official document in which your retail store commits to purchase goods from a supplier or vendor. It includes names of both the buyer (your store) and the vendor, company information, and the quantities of products being purchased.
Purchase orders are issued from a PO management system that syncs with inventory, finance, and supplier portals. Businesses can get real-time information about inbound SKU counts and committed spend, which is important when 58% of brands admit their inventory accuracy is below 80%, as cited by Fluent Commerce’s Inventory Data Accuracy and Promising report.
A good purchase order management system also helps teams free up working capital faster. Coupa’s 2024 spend management benchmark found that teams can move from requisition to approved PO in 3.8 business hours.
Who issues purchase orders?
The buyer is responsible for issuing purchase orders. If you’re ordering inventory for your retail store, for example, it’s your job to create the PO. If you’re fulfilling an order for another business, it’s their job to issue a PO.
Depending on the size of your store, you might have a finance department, purchasing department, or accounts payable team that issues purchase orders. If not, the business owner or store manager usually takes this responsibility.
Who approves purchase orders?
The vendor, be that a manufacturer, contractor, or otherwise, is responsible for approving purchase orders. If you’ve issued a PO for the inventory you’re ordering from a vendor, for example, it’s their job to approve it.
Once approved, the PO becomes a legally binding contract. You’re officially committed to pay that vendor for the goods outlined in the purchase order.
Why is purchase order management important?
Control spending and prevent unauthorized purchases
A well-governed PO workflow blocks unbudgeted, off-contract orders that cut into negotiated savings. In the 2025 ProcureCon CPO Report, 64% of procurement leaders said rogue spend decreased over the previous 12 months after tightening approval rules.
AstraZeneca rolled out Coupa P2P across 11 markets, taking PO-to-approval time from 3 days to 1.5 days and invoice approval from 60 days to 4.5 days, giving finance visibility into every transaction.
Improve communication with suppliers
Supplier portals that show live PO status stop the back-and-forth emails and Slack messages.
A study by the American Productivity & Quality Center (APQC) found that top-performing organizations process purchase orders (POs) in under five hours, while the worst-performing organizations take more than 48 hours. Real-time updates let vendors make self-serve changes, shorten lead time, and keep everyone aligned on dates and deliverables.
Streamline procurement processes
Automation slashes touch-time on every PO. Manufacturers that digitize approvals can save on procurement costs and reduce processing time. Coupled with sub-five-hour cycle times, buyers can focus on building supplier relationships and spend less time on paperwork.
Steps in the PO process
Identify need and raise a requisition
A team flags the need for new inventory or services and submits a purchase requisition with SKU/part numbers, quantities, and budget code. Adding a required-by date and a short business case speeds managerial approval.
Draft and approve the purchase order
Procurement converts the approved requisition into a formal PO that specifies items, prices, delivery terms, and payment conditions. Double-check tax codes and GL accounts so the PO can flow through finance with no rework.
Send the PO to the supplier
Transmit the PO electronically (EDI, supplier portal, or email) to create a verifiable audit trail. Ask the vendor to acknowledge or reject the order within 24 hours.
Supplier confirmation or rejection
The vendor accepts the PO as-is or flags quantity, price, or lead-time issues for rapid resolution. Capture the confirmation in your OMS so downstream teams see the final, agreed-upon terms.
Fulfillment, packing slip, and shipment
The supplier manufactures or picks the order, creates a packing slip that mirrors the PO, and ships with the PO number on the label. Enable automatic status updates so you can track in-transit milestones and pre-book receiving staff.
Goods receipt and inspection
On arrival, warehouse staff verify items and quantities against the PO and packing slip, recording any shortages or damage. Posting the goods-receipt entry immediately updates inventory balances and triggers three-way matching.
Invoice matching and approval
The supplier converts the fulfilled PO into an invoice; the AP system performs a three-way match against the PO and goods-receipt record. Clean invoices auto-approve, while exceptions route to buyers for rapid resolution.
Payment and record keeping
Finance schedules payment per negotiated terms, taking early-pay discounts when cash allows. The settlement is logged in the ERP and supplier scorecard, closing the loop for audit and performance reviews.
Purchase order example
Here’s an example of what a PO might look like for a retail store. The document outlines the vendor’s information, the items being ordered, the quantities, and the shipping terms.
Use a free purchase order template
Need help creating your own PO? Use Shopify’s free purchase order template. Enter the required information—including your store address, vendor company information, and items ordered—to get an electronic purchase order sent directly to your email address, ready to forward to vendors.
PO management software
Shopify
With Shopify, you get purchase orders, inventory receipts, and supplier records in the same admin you use to run your store. No extra apps, APIs, or training. Ecommerce brands needing an integrated PO workflow that syncs with inventory management can leverage Shopify’s features here.
Other features include:
- Draft, issue, and edit POs inside the Shopify admin.
- Convert POs to PDF in one click for suppliers.
- Receive inventory against the PO to auto-update on-hand stock across every location.
- The supplier directory lives in the “Select supplier” dropdown–one record feeds every future PO.
- Sort and filter open POs by creation date, expected arrival, vendor, location, or status.
Coupa
Coupa is a suitable option for enterprises or high-growth organizations that manage thousands of purchase orders (POs) across multiple business units and require in-depth analytics. It centralizes every dollar spent, then uses AI to highlight savings, flag risk, and streamline approvals.
Top features include:
- End-to-end procure-to-pay suite with guided buying, AI spend analysis, and real-time PO tracking.
- Built-in supplier-risk scoring, contract lifecycle management, and AP automation.
- 2025 “agentic AI” release (Navi AI) offers faster data analysis and suggests corrective actions automatically.
NetSuite
NetSuite brings requisitions, POs, inventory, and AP together into one database. Organizations that already use NetSuite ERP, or plan to, can benefit from NetSuite’s purchase management feature.
Features you’ll get:
- Converts purchase requisitions to POs automatically, applies contract pricing, and tracks special orders or drop shipments.
- Flexible approval workflows (simple dollar limits or multi-step SuiteFlow) plus built-in reminders prevent bottlenecks.
- Vendor portal lets suppliers check PO status and delivery dates, reducing email back-and-forth.
Purchase order management best practices
Standardize processes
Lock down reusable templates for purchase requisitions and POs so every buyer captures the same fields, like SKU, GL code, Incoterms, and expected arrival.
Procurement teams that formalize templates slash PO cycle time compared with peers, according to APQC’s 2025 benchmarking of top-quartile performers.
Establish clear approval workflows
Build dollar-based approval tiers and route requests through automated alerts rather than ad-hoc emails. You can speed up sign-off, prevent “shadow buying,” and leave an audit trail for finance and compliance.
Track supplier performance
Score vendors monthly on delivery accuracy, lead-time reliability, and defect rate so issues surface before the next reorder.
A 2025 Deposco survey found that 58% of companies missed delivery or accuracy targets during peak season, proof that real metrics beat gut feel.
Maintain accurate records
There are various ways to track purchase orders. Excel spreadsheets are often the first choice for businesses just coming to grips with them. The only problem? They’re clunky, confusing, and get inaccurate fast, especially if you forget to update the spreadsheet once a PO has been issued, approved, or converted into an invoice.
Ditch the spreadsheets in favor of a PO management system. Apps like Stocky sync with your Shopify store so you can create and track POs from your back office.
Upload company information for each vendor you’re working with. When you need to create a new PO, select the vendor. Stocky will create a PO with its contact information prefilled.
💡 PRO TIP: Having trouble knowing how much stock to order from a vendor? Merchants using Shopify POS can use Stocky’s demand forecasting feature, which uses historical sales data to suggest which products and quantities to reorder.
Are purchase orders right for your retail store?
Purchase orders help retailers track incoming orders, commit to stock further in advance, and prevent order discrepancies. They also provide legal documentation should something go wrong in your supply chain process.
Determine the type of PO you need for your business, then use a purchase order system like Stocky to create them. It’ll make scaling your retail store easier and contribute to balanced inventory levels.
Additional research and content from Alexis Damen.
Read more
- How to Receive Inventory and Keep Your Stockroom Clutter-Free
- Product Assortment: Strategies and Tips for a Winning Product Mix
- 4 Inventory Valuation Methods for Retailers (+ How to Choose One)
- A Simple Guide to Inventory Audits for Retailers
- 10 Ways On-Demand Manufacturing Can Help Retailers Streamline Their Operations
- Phantom Inventory: Why It Happens + How to Spot, Solve, and Prevent It
- The Complete Guide to Purchasing Product Samples
- Procurement: What it Is and How to Create Your Own Process
- Save Time and Money with Just-In-Time Inventory: A Guide for Retailers
Purchase order management FAQ
What is a purchase order and how does it work?
A purchase order (PO) is a formal document that is created by a buyer and sent to a seller as a request for goods or services. It includes the details of the items or services that are being requested, how many units are being requested, the price and payment terms, the expected delivery date, and any other special instructions or requirements. The seller then reviews the PO, and if accepted, will provide the goods or services as specified. Once the goods or services are received, the buyer must then provide payment to the seller according to the terms of the PO.
What is the difference between a purchase order and an invoice?
A purchase order is a document that is sent from a buyer to a supplier that details the items or services being requested. It is a binding agreement between the buyer and the supplier that outlines the terms and conditions of the purchase. An invoice is a document sent from the supplier to the buyer that states the total amount of money due for the goods or services provided. It is sent after the purchase has been made, and it serves as a record of the transaction.
Can I use purchase orders to better manage my inventory levels? How?
Yes, you can use purchase orders to track incoming goods and match them against your sales to determine your stock levels. This can help you plan and maintain optimal inventory levels.
How do I handle purchase order discrepancies, such as receiving fewer items than ordered?
If there is a discrepancy between your purchase order and the goods received, you should contact your supplier to rectify the situation. Some businesses use a goods received note (GRN) to track this process.
How does a purchase order affect my store’s accounting records?
When you issue a purchase order, it becomes a part of your financial records. When the goods or services are received, the corresponding invoice is matched with the purchase order, and the payment is recorded in your accounting system.
What should I do if a supplier fails to fulfill a purchase order?
If a supplier fails to fulfill a purchase order, you should first contact them to understand the issue. If they’re unable to deliver, you may need to seek alternative suppliers. The terms and conditions of your contract should protect you in such situations.
Can a purchase order be changed or canceled after it’s been issued?
It depends on the terms agreed upon with your supplier. In general, changes or cancellations after issuance require communication and agreement from both parties.
