Purchase order basics.

What a PO actually is

A purchase order is a written offer from the buyer to the seller specifying what, how much, when, and at what price. Once accepted by the vendor, it’s a binding commitment on both sides. That’s why it’s more than a convenience document: it’s the artifact your relationship with the vendor and your internal reporting both depend on.

Core fields every PO should carry

• PO number. A unique, durable identifier. Never re-used.
• Buyer and seller identity. Company names, addresses, and contacts on both sides.
• Ship-to. The actual destination address or location. For multi-location POs, the split.
• Order date. When the PO was created.
• Ship-by / cancel-after date. The window inside which the goods must ship. This is your protection against late delivery.
• Line items. SKU, description, variant (size/color), unit cost, quantity, line total.
• Terms. Payment terms (net 30, net 60, prepaid), freight terms (FOB origin or destination), duty responsibility.
• Total. Unit cost total, any surcharges, and the grand total.
• Landed-cost components. Expected freight, duties, brokerage if they’re known at order time.
• Cancellation clauses. What happens if the vendor misses the ship-by date.

Order date vs ship-by date

These are two different things and both matter. Order date anchors the commitment in time for OTB and accounting. Ship-by date sets the latest the goods can leave the vendor for the PO to remain in force. A PO that ships past its ship-by date without an amendment is, under most vendor terms, something you can cancel without penalty. Make sure ship-by dates are on your POs explicitly, and make sure you track them.

Landed cost

Landed cost is the real unit cost on your shelf: wholesale plus freight plus duties plus brokerage. Margin math that ignores landed cost is wrong. Inventory valuation that ignores landed cost is wrong. Reorder math that ignores landed cost is wrong. Good PO systems distribute landed-cost components across the lines of a PO so the cost recorded against each variant reflects what it actually cost to stock. See how Vendee Pro handles landed cost →

Partial receipts

Vendors rarely ship exactly what you ordered in one shipment. The normal case is a partial receipt: some lines in full, some partial, some backordered, some cancelled. A good PO flow treats partial receipts as a first-class concept: receive what arrived, keep the rest of the PO open, allow subsequent shipments to receive against the same document, and track over-receipts explicitly.

Cancellations and backorders

When a vendor tells you a line is not coming, cancel it on the PO. The open commitment updates, OTB is freed, and your records stay accurate. Don’t leave cancelled lines as open backorders; they pollute every downstream report.

What to put in writing beyond the PO

A good PO is paired with (or explicitly references) a vendor purchase-order terms document that covers: defects and returns, chargebacks for short shipments or mislabels, late-shipment penalties, packaging standards, minimum case quantities, and dispute resolution. Without that, the PO by itself is a price-and-quantity document. With it, you have real commercial terms.

Common mistakes

• No ship-by date. You lose your out when the vendor is a month late.
• Wholesale-only costing. Margin math ignores freight and duties.
• One PO per location instead of one multi-location PO. Vendor gets a messy order stack; you get reconciliation headaches.
• Silent edits after submission. If you change a submitted PO, track who changed what and when.
• No link between PO and receipts. You can’t audit partial receipts, returns, or over-shipments without the chain intact.

How Vendee Pro handles POs

Multi-location POs in one document, landed-cost distribution across lines, partial receipts with automatic transfer drafts, undo on receipts, cancellation flows that free up OTB, and a full audit trail on every state change. Everything described here, built in. Read more →