TL;DR
Purchase orders exist to make two people agree on what was bought before anybody is billed for it. In a company with no procurement team that sounds like overhead, right up until an invoice arrives for equipment nobody remembers approving. A light version takes about a day to set up and settles most of those arguments in advance.
- A PO is just a written agreement on what was ordered, before the invoice.
- Without one, the invoice defines the order, which favours the supplier.
- You do not need software. A numbered template and a shared folder work.
- Set one threshold below which nobody bothers, and keep it generous.
- The PO number must reach the invoice and the asset register, or it did nothing.
- Skip the whole thing for subscriptions and recurring fees. It fits poorly.
What purchase orders actually do
Strip away the language and a PO does one thing. It records what you agreed to buy, at what price, before the supplier sends a bill.
Without one, the invoice is the only written description of the order. If it says something different from what you remember agreeing, you are arguing from memory against a document, and that argument has a predictable winner.
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With one, you have two documents and a disagreement between them becomes a factual question rather than a negotiation.
Why equipment specifically
Equipment orders are unusually prone to drift. A specification changes between quote and dispatch. Shipping gets added. A country surcharge appears. Somebody upgrades a machine verbally and nobody writes it down.
Each of those is small. Together they are the reason the invoice does not match what anybody expected, and the reason finance asks a question nobody can answer three weeks later.
Under accounting standards such as IAS 16 on property, plant and equipment, equipment above a threshold is capitalised rather than expensed, which means the paperwork has a second life in the asset ledger. That is a further reason the order record needs to be right at the start.
A process that fits a company with no buyer
Four steps. It takes a day to set up and roughly two minutes per order afterwards.
- Request. One short form: what, why, how much, which cost centre, who asked.
- Approve. One named person per threshold band. Not a committee.
- Issue a number. Sequential, from a shared sheet. The number is the whole point.
- Match. When the invoice arrives, it carries the number and somebody checks the two agree.
No software required. A numbered template in a shared folder and a sheet to log them does the job at small scale, and it migrates cleanly into a real system later because the data is already structured.
The threshold
Set one value below which nobody raises a PO, and make it generous enough that the process does not block a mouse purchase.
Most teams set it too low and then quietly stop following their own rule, which is worse than not having it. A threshold that people actually respect is more valuable than a thorough one they route around.
Review the threshold once a year rather than per purchase. The point is to catch orders big enough to argue about, not to track every cable.
The number has to travel
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This is where most light processes fail. A PO number that lives only in the PO has achieved nothing.
It needs to appear in three places.
On the order to the supplier. Say it in the email. Most suppliers will put it on the invoice if asked at order time and will not if asked afterwards.
On the invoice. Make it a condition of payment, politely. Suppliers deal with this constantly and it is a normal request.
In the asset register. So that two years later, when somebody asks what a device cost and when it was bought, the answer is a lookup rather than an archaeology project.
The small habit that pays later
Record the serial numbers against the PO when the shipment arrives. It takes a minute and it creates the link between what you paid for and what you actually received.
Suppliers who ship and track in one system can usually provide that mapping directly, which removes the manual step. That is part of what asset tracking tied to procurement is for. The limitation is real: it tells you what the supplier shipped, not what your finance system was billed, so the match against the invoice is still yours to do.
When a purchase order is the wrong tool
POs fit one-off purchases of defined things. They fit several common equipment situations badly, and forcing them produces paperwork nobody reads.
Subscriptions and recurring fees. A monthly device management licence does not need a PO each month. Raise one annually against the expected total, or use a contract reference instead.
Variable usage charges. Shipping and duty vary by destination and cannot be known at order time. Agree a tolerance rather than pretending to a number.
Emergencies. A failed laptop on a Monday morning should not wait for an approval chain. Agree an exception route in advance, with retrospective paperwork, so the rule does not have to be broken.
Trivial amounts. Below your threshold, which is exactly why the threshold exists.
The tolerance idea
For anything variable, approve a range rather than a figure. An invoice inside the range is paid without a conversation. Outside it, somebody looks.
This single change removes most of the friction that makes teams abandon the process, because the common case stops requiring a decision.
The decision table
| Situation | Scale | Setup | Primary pain | Recommended starting point |
|---|---|---|---|---|
| No process at all | Under 50 | Founder approves verbally | Disputed invoices | Template, sheet, one threshold |
| Finance asking questions | 50 to 200 | Cards and receipts | No order record | Add the number to invoice and register |
| Invoices never match | Any | PO exists, unused | Number does not travel | Make the number a payment condition |
| Shipping costs vary | Distributed | Several countries | Cannot predict totals | Approve a tolerance, not a figure |
| Process routinely bypassed | Any | Threshold too low | Nobody follows it | Raise the threshold until they do |
Making it stick without a procurement team
The failure mode is not that people disagree with the process. It is that following it is slower than not following it, so under pressure they do not.
Three things keep it alive.
One approver, reachable. If approval requires two people and one is on holiday, the process has a single point of failure every August. Name a deputy.
Same day turnaround. An approval that takes three days teaches people to order first and paper it later, which is the habit you were trying to prevent.
Visible benefit. The first time a disputed invoice is settled in ten minutes because the PO existed, say so publicly. That story does more for adoption than the policy document.
What this is not
It is not a control against fraud, and it is not sufficient for one. A light PO process catches honest confusion, which is almost all of what actually happens. If fraud is the concern, that is a different conversation involving segregation of duties and your auditors.
Being clear about that matters, because teams sometimes adopt a heavy process believing it protects them from something it does not address, and then resent the overhead.
For the adjacent question of who is allowed to approve what, see our guide to who signs off equipment spend. For how this sits with wiping and disposal evidence later in the device life, NIST Special Publication 800-88 on media sanitization is the standard most contracts name.
See how order and serial data arrive together with asset tracking built into procurement, or read our guide to who signs off equipment spend.
Frequently asked questions
Do we need purchase orders without a procurement team?
You need the thing a PO does, which is a written record of what was agreed before the invoice arrives. Without it the invoice becomes the only description of the order, and disagreements turn into your memory against their document. A numbered template in a shared folder plus a log sheet takes a day to set up and about two minutes per order, which is well below the cost of one disputed invoice.
What threshold should we set?
High enough that people actually follow it. Most teams set it too low, quietly stop complying, and end up worse off than with no rule at all. The purpose is to catch orders large enough to be worth arguing about, not to track cables and mice. Review the figure once a year rather than agonising per purchase.
Where does the PO number need to appear?
Three places. On the order you send the supplier, said explicitly in the email, because most will add it to the invoice if asked at order time and will not if asked afterwards. On the invoice, as a condition of payment. And in your asset register, so that two years later the cost and purchase date of a device is a lookup rather than an archaeology project.
When should we skip raising a purchase order?
For subscriptions and recurring licences, where one annual PO or a contract reference fits better than a monthly ritual. For variable charges like shipping and duty, where the figure genuinely cannot be known at order time. For emergencies, which need an agreed exception route with retrospective paperwork. And below your threshold, which is the reason the threshold exists.
How do we handle costs that vary, like shipping?
Approve a tolerance rather than a number. An invoice inside the agreed range is paid without a conversation, and anything outside it gets looked at. This one change removes most of the friction that causes teams to abandon the process, because the ordinary case stops needing a decision from anybody.
Does a purchase order process prevent fraud?
No, and adopting one believing it does leads to resentment about the overhead. A light PO process catches honest confusion, which is almost all of what actually happens in practice. Fraud prevention is a separate conversation involving segregation of duties and your auditors, and it needs controls this process does not provide.
Should we link serial numbers to the purchase order?
Yes, and record them when the shipment arrives rather than later. It takes a minute and creates the link between what you paid for and what you actually received, which is what makes the register useful during an audit. Suppliers who ship and track in one system can often provide that mapping directly, though matching it against the invoice remains your job.
