What Is a Purchase Order?
A purchase order (PO) is a document sent to a supplier confirming your intent to buy goods or services. It specifies items, quantities, agreed prices, and delivery terms. In accounting, POs serve three purposes: they control spending against budgets, provide an audit trail for invoice verification, and help manage inventory levels.
What Are the 4 Types of Purchase Order?
- Standard PO — a one-off order for specific items at agreed prices. Most common for small businesses.
- Planned PO — commits to buying from a supplier over a set period, with delivery dates specified upfront.
- Blanket PO — an open agreement with a supplier for recurring purchases (e.g. monthly office supplies) without fixing exact quantities each time.
- Contract PO — a formal agreement setting terms and conditions, typically used alongside standard or planned POs for large or ongoing procurement.
Xero supports standard purchase orders out of the box. For blanket or contract POs, you can use Xero integrations with specialist procurement apps from the Xero App Store.
How Do Purchase Orders Work in Xero?
In Xero, a purchase order tracks what you’ve ordered from a supplier before you receive the goods or the bill. You create a PO, send it to the supplier, and when the goods arrive, convert the PO into a bill with one click. This links the original order to the payment, giving you a clear audit trail and accurate expense tracking.
Xero shows the status of each PO — Draft, Submitted, or Billed — so you always know which orders are outstanding.
How to Create a Purchase Order in Xero
- Go to Business > Purchase Orders and click New Purchase Order.
- Select the supplier from your contacts list (or add a new one).
- Enter the delivery address if it differs from your registered address.
- Add line items: description, quantity, unit price, account code, and tax rate.
- Set the delivery date and add any notes for the supplier.
- Click Approve to finalise, then Send to email the PO directly to your supplier.
Watch: How to use purchase orders in Xero
Where to Find Purchase Orders in Xero
Navigate to Business > Purchase Orders. This screen shows all your POs organised by status: Draft, Awaiting Approval, and Approved. Use the search bar or filters to find a specific order by supplier name, PO number, or date range.
Converting a Purchase Order into a Bill
When goods arrive, open the purchase order and click Copy to Bill. Xero pre-fills the bill with the PO details — line items, quantities, and prices — so you only need to verify the amounts and add the invoice number from your supplier. This eliminates duplicate data entry and ensures your expense records match what was originally ordered.
Customising Purchase Order Templates
To brand your POs, go to Settings > Invoice Settings > Purchase Orders. You can upload your logo, choose fonts and colours, add custom fields (like a project reference), and set a numbering prefix. A professional-looking PO reinforces your brand with suppliers and reduces back-and-forth on order details.
Purchase Order Approval Workflow
If your business needs spending controls, enable purchase order approvals in Xero. Users with standard roles can create POs but must submit them for approval. Admins or authorised approvers then review and approve before the PO can be sent to the supplier. This prevents unauthorised purchases and keeps procurement within budget.
Watch: Send your supplier a purchase order with Xero
Tracking Inventory with Purchase Orders
If you use Xero’s inventory tracking, purchase orders automatically update your stock levels when you convert a PO to a bill and mark items as received. This gives you real-time visibility into what’s on order versus what’s in stock, helping you avoid shortages and overstocking.
Conclusion
Purchase orders in Xero streamline procurement, improve financial accuracy, and give you a clear audit trail from order to payment. Whether you’re managing a handful of suppliers or running complex multi-item orders, Xero’s PO features keep everything organised in one place.
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Looking for related guidance? Our articles on accounts payable and accounts receivable in Xero, managing inventory in Xero, and bank reconciliation in Xero cover the next steps. You may also want to review how to set up user permissions for purchase order approval.
