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4 Types of Purchase Orders and Their Automation

4 Types of Purchase Orders and Their Automation

For small to medium-sized businesses, an inefficient purchase order process can detract your business from doing what you do best. Failing to develop a streamlined process will cost your business time ...

For small to medium-sized businesses, an inefficient purchase order process can detract your business from doing what you do best. 

Failing to develop a streamlined process will cost your businesses time and money. As well as increasing the likelihood of human errors along the way. 

If you aren’t gathering useful insights from your purchase order process then you’re missing a key channel for improving your purchase order workflow.

What if you could automate the purchase order process? Minimising all that wasted time, as requests are passed back and forth between departments and procurement teams.

We want to help you to succeed. Optimising these basic business functions are pivotal for the future success of any business.

In this article, we’re going to provide you with everything you need to know about purchase orders, as well as actionable solutions for improving your current workflow. 

By Fully Understanding Purchase Orders You Can Save Your Business Time and Money

What is a purchase order? A purchase order is a legal, contractual agreement between a purchaser and a supplier.

The purchase order process is usually managed and controlled by a procurement team. Usually, the accounting department will assign portions of the businesses review to specific departments. 

These funds are reserved for when an order is ‘released’. When an order is released, it means that the order request has been sent to the supplier, who will then begin the fulfilment process. The reservation of business funds for purchase orders is known as ‘encumbrance’.

Building a successful relationship with a supplier is integral for facilitating the growth of small-medium sized businesses.

By switching to a cloud-based automated workflow, you’ll increase your chances of building a flourishing partnership between customer and supplier. Eradicating issues and ‘speed-bumps’ in your order process will improve your business image and the impression you make on others.

What Are the Different Purchase Order Types and How Do They Apply To Your Business?

Before creating a purchase order workflow, it’s important to understand the 4 different types of purchase orders and how to use them.

Let’s jump into it…

The different types of purchase orders are dependent on one thing: what you know about the order, and what you don’t know.


These Are the Typical Features That Will Appear on a Purchase Order

  • Item(s) to be purchased (including any model or reference numbers)
  • Quantity
  • The agreed price of goods
  • Delivery schedule (date and location)
  • Name and billing address of the buyer
  • Name and payment receipt address of the seller
  • Terms of agreement (payment and delivery deadlines etc.)
  • Purchase order reference number
  • Date of issue


Ensuring that your purchase order contains all of the relevant information will mitigate any chance of delays.

1. Standard Purchase Order

The standard purchase order is the most common type of order. In this instance, the customer can provide ALL of the details about the order. These details will ALWAYS include:

  • Item(s) to be purchased (including any model or reference numbers)
  • Quantity
  • The agreed price of goods
  • Delivery schedule (date and location)

Example of a Standard Purchase Order

Imagine that you’re a DIY store and you’re stock of white interior paint has started to run low. After viewing your previous sales insights, you know that January has been a popular month for people to start refurbishing their homes. 

You decide to send your supplier a standard purchase order telling them that you would like X amount of white interior paint, at the agreed price. You would like the order to be delivered to your shop by the end of December.

2. Blanket Purchase Order

A blanket purchase order tells the supplier that you’re going to need a certain amount of a specified item, within a given timeframe. 

The difference here is, you are not currently able to inform the supplier EXACLTY when you will be releasing the order. 

Typically, a blanket purchase order will be subject to an agreement between customer and supplier. This agreement will determine how long the goods will be reserved for the customer. The details on a blanket order will include:

  • Item(s) to be purchased (including any model or reference numbers)
  • Quantity
  • The agreed price of goods

Example of a Blanket Purchase Order

You own a bakery and you’re preparing for the Christmas period, a notoriously busy time of year. You know that you’re going to need X amount of flour during this season, but you don’t yet know when the order needs delivering.

You contact your supplier and ask them to reserve the flour for you. When the time comes that you need the item, you will releases the order, informing the supplier how much you need and when you need it.


The supplier may agree to milestone discounts determined by a time period or a number of fulfilled orders. 

3. Planned Purchase Order

A planned purchase is similar to a standard purchase order in that all the information is already known about the order. The difference here is that a planned purchase order features a tentative order schedule.

This means that the item, quantity, and delivery schedule is known, but the customer will need to release each order before it is fulfilled by the supplier. A planned purchase order will include:

  • Item(s) to be purchased (including any model or reference numbers)
  • Quantity
  • The agreed price of goods
  • TENTATIVE Delivery schedule (date and location)

Example of a Planned Purchase Order

A coffee shop knows that throughout the year they will need X amount of their premium roasted blend.


The coffee shop makes a plan purchase order with their supplier, detailing the item, the quantity, and the delivery schedule. Once the current stock starts to run low, an order will be released to the supplier.

4. Contract Purchase Order

This is the least common type of purchase order. With contract purchase orders, little to no information is known about the orders.

A contract purchase order is a legal agreement between the two parties. It ensures continued business between customer and supplier for a predefined period. 


Whenever an order is needed, the customer will usually send a standard purchase order to the supplier.

Example of a Contract Purchase Order

A football stadium has decided to set up a contract purchase order with a water company. The contract stipulates that the stadium will purchase orders from this company for any upcoming events.

The supplier has agreed to issue a 30% discount on orders over 100 units providing that the brand is advertised as an official sponsor of the event.

How Automating Workflows With AhoyTeam Can Streamline Your Purchase Order Process

Employee purchase requisition and purchase orders are cornerstones of the procurement process. Small and medium-sized companies don’t need to implement big solutions such as SAP to cover this process. 

Create streamlined workflows in Slack with AhoyTeam and optimise your basic business processes. Easily combine automated email triggers, approvals in unified forms, and keep employees updated with integrated Slack notifications.


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