What is a Purchase Order and How Do You Create a Template in Excel?

A purchase order (PO) is a legally binding document issued by a buyer to a seller, formalizing the intent to purchase specific goods or services. Creating a standardized purchase order template in Excel is an efficient way to track spending, streamline procurement, and maintain clear records for both parties involved in a transaction. This guide outlines the essential components of a PO and provides a step-by-step method for building a custom template.

What is a Purchase Order and Why is it Important?

A purchase order, often abbreviated as PO, serves as a formal offer from a business to a supplier. It becomes a binding contract once the seller accepts it. The primary importance of a purchase order lies in its ability to create a clear audit trail. According to standard procurement practices, POs help prevent duplicate orders, clarify delivery expectations, and simplify the accounts payable process by matching incoming invoices to original orders. Key details included are a unique PO number, product descriptions, quantities, agreed prices, and delivery dates.

What are the Different Types of Purchase Orders?

Understanding the various types of purchase orders allows businesses to select the right tool for different purchasing scenarios. The main types are:

How to Create a Purchase Order Template in Excel?

Creating a reusable template in Excel standardizes your procurement process. You can either customize a pre-built template or create one from scratch. Based on our assessment experience, following these steps ensures you capture all critical information:

1. Open Excel and Select a Template: Launch Microsoft Excel and click on "New." In the search bar, type "purchase order" or "invoice" to browse Microsoft's library of free templates. Selecting a pre-designed template saves time and ensures a professional layout.
2. Customize the Header: Input your company's legal name, logo, physical address, and contact information. Ensure there is a prominent field for a unique, sequential purchase order number and the issue date.
3. Add Supplier and Ship-to Details: Designate clear sections for the vendor's information (name, address, contact person) and the final delivery address if different from the billing address.
4. Create an Order Details Table: This is the core of the PO. Use Excel's grid to create columns for: Item Description, Stock Keeping Unit (SKU) or Model Number, Quantity, Unit Price, and Line Total (Quantity x Unit Price).
5. Include an Order Summary Section: At the bottom of the template, create a section that automatically calculates the subtotal, any applicable tax or discounts, and the final total amount. Also, include fields for payment terms (e.g., Net 30) and special delivery instructions.

What Essential Information Should a Purchase Order Template Include?

A comprehensive template minimizes errors and delays. The essential elements to record are:

• Header Information: Company branding, PO number, and issue date.
• Parties Involved: Complete supplier and "ship-to" contact details.
• Order Specifics: Detailed product/service descriptions, SKUs, quantities, and unit prices.
• Financials: Subtotals, taxes, discounts, shipping costs, and the grand total.
• Logistics & Terms: Expected delivery date, shipping method, payment terms, and any special conditions.

To implement an effective procurement system, start by developing a standardized Excel purchase order template that includes all critical details like a unique PO number, itemized costs, and clear terms. This practice enhances accountability, simplifies reconciliation with invoices, and provides legal protection for your business.