What is a PO number?

When you go into business with customers, suppliers, or clients, you’ll want a solid paper trail you can depend on not only to support your accounting cycle, but also to make sure everyone is on the same page. That’s what makes PO numbers so important. Learn more about the meaning of PO numbers, right here.

PO number meaning

A PO number – i.e., a purchase order number – is a unique number given to a specific transaction. These numbers are found on the purchase order document, which are legally binding. A purchase order is made at the start of a transaction and outlines precisely what will be provided, in what quantities, and for what price. The PO may also include details of payment terms, typically outlining that it should be paid within 30 days. A purchase order number may also be called a PO tracking number, as it will be used throughout the lifespan of the project to help you track progress.

Why are PO numbers important?

PO numbers are useful for admin and finances in a number of ways, including:

• Helping you manage inventory by knowing what has been ordered

• Giving a clear overview of what is due to be paid by which client

• Ensuring prices are agreed and no one can go back on their word

Arguably, the most important aspect of PO numbers and purchase orders is that they are legal documents. For the security of all parties involved, every transaction should be guarded by a purchase order.

How to make a PO tracking number

Depending on the size of your business, making a PO number can be relatively straightforward. For small businesses and sole traders, you can create POs using a unique set of numbers, for example, you could simply start with PO 0001, progressing to PO 0002, and so on. For larger companies that need multiple documents, each with a PO tracking number, every single day, it is more efficient to look for accounting software with this feature.

What is a PO number invoice?

A purchase order may also be called a PO number invoice, but an invoice and a purchase order are not the same thing. A purchase order comes at the beginning of the process, outlining what has been agreed and is created by the buyer. An invoice comes at the end of the process and details what needs to be paid, these are created by the seller. A PO number should appear on both documents.

When should I create a PO number?

Every transaction should have a PO number, to be generated and applied to a purchase order at the start. If a customer orders a service one month, that purchase should generate a purchase order, even if the same customer orders another service the following month. You can advise that they bundle services and items together in one purchase, if this allows for greater efficiency, and there is no obligation to settle on the customer’s initial purchase order if you want to negotiate price. Just make sure that your final agreements are solidified in an up-to-date purchase order. Your PO number, as their name implies, should correspond to every order, not every client or every project.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.