Purchase orders are requests to a seller to provide a certain product or service. Purchase orders are a business tool to control both physical and financial outcomes related to operational activities. For publicly traded entities, they are required as a function of internal controls to minimize defalcations.
Purchase orders are an accounting subsystem that allocates resources for corporate needs. It is traditionally used with inventory whereby a request to a vendor is implemented and the vendor has a period of time to fulfill the order or lose the rights to complete the transaction. Purchase orders use a sequential numbering system for tracking and control purposes.
In business purchases describes the process of acquiring the necessary goods and materials for operations. Many novice business individuals believe the term is strictly limited to those materials purchased for resale. In reality it is much broader in scope and encompasses all forms of expenses too. When a company buys insurance, it is making a purchase.