Can I use purchase orders on Xero Starter (Ignite)?

Yes. Purchase orders are available on all Xero plans, including the entry plan now called Ignite. You do not need a higher-tier plan to create, send, and convert POs.

Can I post a purchase order in Xero if the supplier is not in my contacts?

No. You must add the supplier as a contact before raising the PO. Go to Contacts > Add Contact, enter at least a name and email, then return to Business > Purchase Orders to raise the PO. Tax details, address, and bank information can be added later.

Xero Purchase Orders: How to Create, Approve & Convert (UK)

Q: Where do I find purchase orders in Xero?

In Xero, navigate to Business > Purchase Orders. This screen shows every PO 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.

Q: What are the 4 types of purchase order?

The four types are: Standard PO (one-off purchase, fixed quantity and price), Planned PO (future delivery commitment with anticipated dates), Blanket PO (open-ended agreement at agreed prices over a set period) and Contract PO (master contract supporting multiple POs against agreed terms). Xero supports standard purchase orders out of the box; blanket and contract POs are typically managed via procurement apps from the Xero App Store.

Rates and thresholds referenced are current as at May 2026. The UK VAT registration threshold is £90,000 of taxable turnover in any rolling 12-month period (from 1 April 2024). Subject to change at fiscal events; take independent advice before relying on any threshold for a specific transaction.

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.

For UK small businesses using Xero, purchase orders sit between the decision to buy and the actual bill arriving. They create a paper trail that links every expense back to an approved order, which matters for VAT records, year-end accounts, and audit readiness. In our experience implementing Xero for SMB manufacturers and wholesalers, the firms that get the most value out of POs are the ones that treat them as a budget-control tool, not just a procurement formality.

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 have 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. You can filter by status, supplier, or date range to get a real-time view of your procurement pipeline. For businesses preparing for Making Tax Digital for VAT and (from April 2026 onward) for Income Tax Self Assessment, having every committed spend traceable from PO to bill to bank payment is what gives the digital records their integrity.

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.

Each purchase order is automatically assigned a sequential PO number, which you can customise with a prefix (e.g. “PO-2026-001”). This numbering system makes it easy to reference specific orders when chasing deliveries or querying invoices with suppliers.

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.

You can also access purchase orders from a supplier’s contact record. Open the contact, click the Activity tab, and all POs, bills, and payments for that supplier appear in one timeline.

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.

If the supplier delivers only part of the order, you can partially convert the PO. Xero keeps the remaining items on the original purchase order so you can convert the rest when they arrive. This is common in manufacturing and wholesale where split deliveries happen regularly.

Worked Example: Quarterly PO Reconciliation for a Small Manufacturer

To make this concrete, here is how a quarterly PO-to-bill reconciliation actually looks for a typical SMB manufacturer running Xero. The example is anonymised and figures are illustrative, but it mirrors the pattern we work through with clients every quarter.

Business profile. A small precision-engineering firm in the North West, turnover roughly £1.2m, raising about 5 purchase orders per week across 18 active suppliers. Stock is held; goods receive notes (GRNs) are recorded on paper at the loading bay and then keyed into Xero by the bookkeeper twice a week. (For a fuller walkthrough of stock workflows in Xero, see our guide to Xero inventory management.)

The quarter under review (Q4, January to March).

Item	Value
Purchase orders raised in quarter	62 POs, total committed value £148,420
POs fully billed (converted to bill, supplier invoice received)	54 POs, total £131,205
POs partially billed (split delivery)	5 POs, billed value £9,840 (of £14,210 committed)
POs still in Submitted status (goods received, invoice awaited)	3 POs, total £3,005
POs awaiting goods (still Approved, not yet delivered)	0

The reconciliation walk-through.

Run the Purchase Orders report at Business > Purchase Orders > filter by date range, export to CSV. This gives the headline 62 POs / £148,420.
Run the Bills report for the same period, filter for bills linked to a PO. Total billed £141,045 (the £131,205 fully-billed plus £9,840 partially-billed).
Cross-check committed-but-not-yet-invoiced. £148,420 less £141,045 = £7,375 of goods either received but un-invoiced, or not yet delivered. The 3 Submitted POs (£3,005) plus the £4,370 outstanding on the 5 partial POs reconciles cleanly.
Post the accrual. The £3,005 of goods received but un-invoiced needs an accrual journal at quarter-end so the cost lands in the right period. Debit purchases £3,005, credit accruals £3,005. Reverse in the following period when the supplier invoice arrives. The partial-PO £4,370 stays as a commitment, not an accrual, because the goods have not yet been received.
Check VAT. Of the £141,045 billed, £128,225 is standard-rated supplies (input VAT £25,645 recoverable). The rest is zero-rated raw materials. Trace input VAT line by line back to the originating PO to satisfy the HMRC Input Tax Manual evidence requirement.
Flag exceptions. One PO showed a unit-price variance of £2.40 per unit between PO and supplier invoice on 200 units (£480 overcharge). Raised with the supplier; credit note issued the following month.

Why this matters. Without PO-to-bill linkage in Xero, the £480 supplier overcharge would have been paid in full and lost. The £3,005 accrual would have been missed, distorting the quarter’s profit. And the input VAT recovery on the £128,225 would have been harder to defend if HMRC asked for the audit trail. The PO function is what makes all three of these routine rather than forensic.

Xero vs QuickBooks vs Sage Purchase Orders

Xero is not the only option, and an honest comparison helps you decide whether to migrate from another platform or stay where you are. We use all three with clients and the differences in PO handling matter once you scale past a handful of suppliers.

Feature	Xero	QuickBooks Online	Sage Business Cloud
PO included on all plans	Yes (all plans, including Ignite/Starter)	Plus and Advanced only	Yes (Accounting Standard and above)
One-click PO to bill conversion	Yes	Yes	Yes
Partial PO conversion (split deliveries)	Yes, native	Yes, native	Limited; usually needs add-on
Batch PO import from CSV	Not native (requires add-on like Precoro)	Yes, native	Limited
PO approval workflow (multi-tier)	Basic role-based; full workflow via ApprovalMax	Built-in approval rules in Advanced plan	Sage Approvals add-on
Three-way matching (PO / GRN / invoice)	Via add-on (Precoro, Lightyear)	Via add-on	Stronger in Sage 200, weaker in Business Cloud
App marketplace for procurement	Largest of the three (1,000+ apps)	Strong	Smaller, more enterprise-focused
UK MTD compatibility	Full	Full	Full

The honest read: QuickBooks wins for batch PO import from CSV, which matters if you process 50+ POs a week and want to load them from a procurement spreadsheet without a third-party app. Sage wins for deep three-way matching at the £5m-plus turnover bracket, particularly on Sage 200. Xero wins for everything in between, especially the breadth of its app marketplace and the fact that POs are on every plan with no upsell to a higher tier.

When You Need Purchase Orders in Xero, and When You Do Not

Not every business benefits from running formal purchase orders. The decision sequence below is the one we walk through with new Xero clients.

If you have fewer than 5 suppliers and spend less than £2,000 per month with each, skip POs. Go straight to bills. The overhead of raising a PO for every coffee order is not worth the audit-trail benefit at that scale.
If you spend more than £5,000 per month with any single supplier, or you hold stock, you should be raising POs. The discipline of agreeing price and quantity before the supplier ships protects you from creep, supports stock control, and gives you the basis for accruals at period end.
If you have any approval thresholds at all (e.g. anything over £1,000 needs sign-off), POs are non-negotiable. The approval happens at PO stage, before money is committed, not at bill stage when the goods are already on site.
If you operate across multiple sites or warehouses, POs are essential. Delivery address per PO, stock allocation per location, and reconciliation of inter-warehouse movements all hang off the PO record.
If you are preparing for sale, fundraise, or audit, retrofit POs at least 6 months before the diligence window opens. Auditors and acquirers expect a PO-to-bill-to-payment chain on material spend. Trying to recreate one from scratch under deadline is painful and looks bad.

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 purchase order template reinforces your brand with suppliers and reduces back-and-forth on order details.

Custom fields are particularly useful if you need to reference project codes, cost centres, or department names on your POs. The supplier sees these on the document, and they flow through to the bill when you convert, keeping your records consistent.

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.

For businesses with multiple approvers or spending tiers, third-party approval workflow apps from the Xero App Store add more granular control. Apps like ApprovalMax and Lightyear let you set approval rules based on amount, department, or supplier category – so a £500 stationery order routes differently from a £15,000 equipment purchase.

Watch: Send your supplier a purchase order with Xero

Best Purchase Order Apps That Integrate with Xero

Xero’s built-in purchase order features cover the basics, but if your procurement process is more complex, these Xero App Store integrations add extra capability:

ApprovalMax – multi-level approval workflows for purchase orders and bills. Set rules by amount, supplier, or category. Integrates directly with Xero so approved POs sync automatically.
Precoro – full purchase order management system with budget tracking, three-way matching (PO vs delivery note vs invoice), and supplier portal. Syncs purchase orders and bills with your Xero account in real time.
Lightyear – automates accounts payable by extracting data from supplier invoices and matching them against purchase orders in Xero. Reduces manual data entry significantly.
Tradify – built for trades businesses (plumbers, electricians, builders). Creates purchase orders from job quotes and syncs them to Xero for invoicing and cost tracking.

All of these apps are available from the Xero Marketplace UK and offer free trials. If you are unsure which suits your business, get in touch and we can advise based on your procurement volume and complexity.

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 is on order versus what is in stock, helping you avoid shortages and overstocking.

For businesses that hold significant stock, linking purchase orders to Xero’s inventory management means your financial records always reflect actual stock movements. The cost of goods sold updates automatically, and your balance sheet shows accurate inventory values without manual adjustments.

Purchase Order Best Practices for Small Businesses

Getting the most out of purchase orders in Xero comes down to a few habits:

Always create a PO before ordering – even for small purchases. It takes 30 seconds and saves hours of invoice queries later.
Use consistent item descriptions – if you buy “A4 copier paper” from one supplier, don’t call it “printing paper” on another PO. Consistent naming makes reporting and bank reconciliation easier.
Set up approval thresholds – decide a spending limit above which POs need approval. This is good governance and catches errors before they become expensive.
Review outstanding POs monthly – go to Business > Purchase Orders and check for old POs stuck in Draft or Submitted status. Chase suppliers or close POs that are no longer needed.
Match POs to bills on receipt – convert POs to bills as soon as goods arrive, while the delivery is fresh. Delays lead to mismatches and forgotten items.

Edge Cases and Less Obvious Situations

The common Xero PO workflow handles roughly 80% of what most SMBs need. The remaining 20% is where firms quietly lose time. These are the situations we see most often in practice.

Supplier invoice arrives before the PO is raised

Common when a procurement decision was made on a phone call. Best practice: raise the PO retrospectively, dated the date of the original commitment, then convert it to a bill linked to the invoice. The audit trail is preserved and your monthly PO report still ties out.

Foreign-currency POs and exchange-rate movements

Xero supports multi-currency POs on the Established (formerly Premium) plan. The PO is raised in the supplier’s currency; on conversion to a bill, Xero applies the prevailing exchange rate. If the rate has moved between PO and bill, the exchange difference posts to a separate FX gain/loss account. Watch for this on long-lead-time imports where the sterling value can drift by 3-5%.

Goods received but supplier never invoices

Happens when a supplier disputes whether they ever shipped. The PO sits in Submitted forever, distorting your committed-spend report. After 90 days with no invoice, either close the PO with a note explaining the dispute, or post a manual bill to recognise the cost if you genuinely received the goods.

Partial credit notes against a partially-billed PO

A supplier credits you for damaged stock from a delivery that was only partially billed. The credit note links to the bill, not the original PO. You may need a manual adjustment on the PO to close out the committed value cleanly.

POs raised by staff who later leave

An orphaned PO whose originator has left the business is a common source of stale clutter. The reviewing accountant inherits it. The fix: at every staff handover, run Business > Purchase Orders, filter by Created By, and reassign or close every open PO from the leaver before deactivating their Xero user.

PO numbering after a year-end reset

If you reset the PO prefix at year-end (e.g. PO-2025-XXX rolls to PO-2026-001), Xero will not block a duplicate number from a closed prior year if the sequence overlaps. Audit periodically to check for duplicates.

Frequently Asked Questions

How do I raise a purchase order in Xero?

Go to Business > Purchase Orders > New Purchase Order. Pick the supplier, add line items with descriptions, quantities, unit prices and the tax rate, set a delivery date, then click Approve. The PO is given a sequential number you can customise with a prefix such as PO-2026-001.

What is a purchase order in Xero?

A purchase order in Xero is a document that commits you to buying specified goods or services from a supplier at agreed prices and quantities. It sits before the bill in the procurement chain and gives you an audit trail, budget control, and (when converted to a bill on delivery) avoids duplicate data entry.

How do I import purchase orders into Xero?

Xero does not natively support bulk CSV import of purchase orders the way it does for bills or contacts. To import POs in bulk you need a third-party app such as Precoro or a bespoke API integration via the Xero Developer Platform. For under ten POs at a time, manual entry is usually faster than setting up an import.

What file format do I need for importing purchase orders?

If you use a third-party importer such as Precoro or a custom Xero API integration, the standard is CSV with columns matching the importer’s template (typically: supplier name, PO number, line description, quantity, unit price, tax rate, account code, delivery date). Xero itself does not accept a native PO import file.

Can I email a purchase order directly from Xero?

Yes. Once a PO is approved, click Send and Xero emails it as a PDF attachment to the supplier’s email address stored in their contact record. You can customise the email subject line and body text in your email settings.

Is there a limit to how many purchase orders I can create?

No. All Xero plans include unlimited purchase orders. There is no extra charge for using this feature.

Can I use purchase orders if I am on Xero Starter (Ignite)?

Yes. Purchase orders are available on all Xero plans, including Starter (now called Ignite). You do not need a higher-tier plan to create, send, and convert POs.

How does a Xero and purchase order system integration work?

Third-party PO management systems (Precoro, Lightyear, ApprovalMax) connect via the Xero API. Approved POs sync into Xero as native PO records; bills generated from those POs sync back as Xero bills. Supplier records and chart-of-accounts mappings are reconciled on both sides at setup.

What are the key features and benefits of a purchase order management app that connects to Xero?

The five capabilities that justify a third-party app over native Xero POs are: (1) multi-level approval workflows with rules by amount or category, (2) three-way matching between PO, goods received note, and supplier invoice, (3) budget tracking against PO commitments at department or project level, (4) supplier-portal access so vendors can confirm POs and submit invoices, and (5) bulk CSV or spreadsheet import for high-volume procurement teams.

How should purchase orders be handled when integrating with Xero?

The clean pattern is: raise and approve the PO in the third-party system, sync it to Xero as a native PO, convert it to a bill in Xero when the supplier invoice arrives (or have the third-party system push the bill in). Avoid raising the same PO twice in both systems – pick one as the source of truth.

Can I still post purchase orders if a supplier is not yet in Xero?

No, you cannot raise a PO without selecting a supplier from your contacts. The quickest workaround is to add the supplier first (Contacts > Add Contact, minimum: name and email), then raise the PO. You can fill in tax details, address, and bank information later when the bill arrives.

How do I track partial deliveries against a single PO?

Open the PO and click Copy to Bill, then edit the bill to show only the line items and quantities that have actually arrived. Xero keeps the remaining items on the original PO so you can convert the rest when they arrive. The PO status stays Approved until everything is billed.

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Managing Purchase Orders in Xero