Purchase order software: what it does and how to choose
Short answer
Purchase order software creates, approves, sends and tracks purchase orders in one system, so each order has a number, an approver and a record the invoice can match.
Key takeaways
- Purchase order software, or a purchase order system, gives every order a unique number, an approval, a sent copy, the supplier’s answer and a status that receipts and invoices update.
- It comes in four forms: the PO feature of accounting software, the purchasing module of an ERP, a dedicated purchasing or P2P tool, and the ordering part of a source-to-pay suite.
- An automated purchase order system can create the order on its own only when the supplier and the price are already known, for example from a catalogue or a contract.
- Choose it with your own cases: a price change after approval, a partial delivery, a blanket order with releases and an invoice that quotes the PO number.
- Most organisations need it when invoices arrive without PO numbers, approvals live in email and nobody can say what is still on order.
What is purchase order software?
Purchase order software is an application that creates purchase orders, routes them for approval, sends them to suppliers and tracks each one until it is received, invoiced and closed. It replaces orders typed in a word processor or a spreadsheet with numbered records that the receipt and the invoice can be matched against.
It goes by several names: purchase order system, PO software, purchase order management software. They describe the same job. What a purchase order is, and what it contains, is explained in what is a purchase order. This guide is about the system that issues and follows them.
Purchase order software is narrower than procure-to-pay software, which also runs catalogues, guided buying, invoice capture and payment preparation. Many organisations start with a PO system and add the rest later. Others get PO features inside a larger suite. The choice depends on how many orders you place and where your invoices are processed.
A common starting point: a 60-person company issues orders from a spreadsheet template. Two buyers use the same PO number in the same week. A supplier invoices a higher price than agreed, and nobody can find the approved version of the order. Finance closes the month without knowing what is still on order. A purchase order system fixes each of these by keeping one numbered record per order, with its history.
What does a purchase order system do?
A purchase order system follows the order through its life: creation, approval, dispatch, the supplier’s answer, changes, receipt, invoice and closure. The table lists each function, what it does and the question that shows whether a product does it well.
| Function | What it does | Question to ask |
|---|---|---|
| Creation | Builds the PO from an approved requisition, a catalogue item, a contract or a blank form | Can an approved requisition become a PO without retyping? |
| Numbering | Gives each PO a unique number from a set sequence, per company or entity | Can two users ever get the same number, and can we set our own format? |
| Approval | Routes the PO by amount, category, cost centre or project, with delegation during absence | What happens when an approved PO is changed and its total goes up? |
| Dispatch | Sends the PO by email as a PDF, through a supplier portal, or as an electronic message (cXML, Peppol order) | Which channels are included, and how does the supplier reply? |
| Supplier answer | Records the supplier’s acceptance, acceptance with changes, or rejection | Is an answer with a new delivery date or price shown to the buyer for a decision? |
| Change orders | Creates a new version of the PO, keeps the old one and resends it | Can we see who changed what, and when, on every version? |
| Receipt | Records goods received or services confirmed against PO lines, including partial receipts | Can a requester confirm a service without help from the warehouse? |
| Invoice link | Matches the invoice to the PO and receipt, or converts the PO into a bill in accounting | Does a price or quantity difference stop the invoice, and who sees it? |
| Open orders | Reports what is ordered but not yet received or invoiced, by supplier, cost centre and age | Can finance get open commitments at month end without a manual export? |
| Agreements and releases | Holds blanket or contract agreements and issues releases against them | Does the system stop releases once the agreed ceiling is reached? |
Approval of changes, the supplier’s answer and the open-order report separate a real purchase order system from a PO template with a number counter.
Two electronic formats matter for dispatch. cXML carries new, changed and cancelled purchase orders between buying systems and suppliers. The Peppol ordering profile defines an order and an order response in which the supplier accepts, accepts with changes or rejects the order; only the quantity, delivery period, a replacement item and the price may be changed in that response. A system that reads these replies saves the buyer from retyping the supplier’s email.
Agreements matter as soon as you buy the same things often. Oracle Purchasing, for example, separates four document types: the standard purchase order, the planned purchase order with scheduled releases, the blanket purchase agreement with blanket releases, and the contract purchase agreement. Other systems use other names, but a buyer with framework agreements needs some way to order against them and track what has been used.
When do you need purchase order software?
You need purchase order software when the order is no longer a reliable record. The signs are easy to spot in accounts payable:
- Invoices arrive with no PO number, or with a number nobody can find.
- Orders are approved by email, and the approval cannot be linked to the order that was sent.
- Suppliers invoice prices or quantities that differ from what was ordered, and the difference is found after payment.
- Finance cannot say at month end what has been ordered but not yet invoiced.
- POs are raised after the invoice has arrived, only to satisfy the process.
- Two people can issue orders with the same number.
A small business placing a few orders a month may not need a separate tool. A PO feature in its accounting software, or a good template with a register, can be enough. A system is usually worth its cost when several people order, approval rules depend on amounts or budgets, and invoices must be matched before payment. Purchases that never get a PO, such as small card purchases or rent, stay outside the system under written rules, as the procure-to-pay guide explains.
What types of purchase order software are there?
Purchase order software comes in four types. They differ in how much of the buying cycle they cover around the order itself. The examples are taken from each vendor’s own documentation and pages, not from testing.
| Type | Scope around the PO | When it fits | Examples, as vendors describe them |
|---|---|---|---|
| PO feature of accounting software | Create, send and convert POs into bills; little or no approval workflow | Small businesses with one or two buyers | QuickBooks Online (purchase orders in the Plus and Advanced plans); Xero (purchase orders with approval rights, own numbering, conversion into bills) |
| ERP purchasing module | Requisitions, POs, agreements, goods receipt and invoice verification inside the finance system | Stock or direct purchases, professional buyers, finance already on the ERP | Oracle Fusion Cloud Procurement; SAP S/4HANA operational procurement |
| Dedicated purchasing or P2P tool | Requests, approvals and budgets, POs, receipts and invoices, connected to accounting or the ERP | Many occasional requesters buying indirect goods and services | Precoro; Procurify |
| Ordering within a source-to-pay suite | POs that share supplier, contract and catalogue data with sourcing and contract management | A wider programme that also changes sourcing and contracts | Coupa, Ivalua, JAGGAER, SAP Ariba, Zycus |
Pick the type before the product: accounting software for a few orders, a dedicated tool for many requesters, an ERP module for stock and direct purchases, a suite only when sourcing and contracts change too.
Disclosure: the author works as an Ivalua consultant. This comparison relies on public documentation and, where stated, first-hand use.
Inclusion in the table is not a recommendation, and vendor descriptions change often. For the wider market of buying tools, see the procurement software guide; for the full requisition-to-payment cycle, the procure-to-pay software guide sets out a longer selection method.
What is an automated purchase order system?
An automated purchase order system creates and sends purchase orders without a buyer typing them. It works only when everything the order needs is already known: the item, the supplier, the price and the account to charge. In practice, automation comes from three places: approved requisitions for catalogue or contract items, stock that falls below a reorder point, and planning runs that calculate what production needs.
SAP’s rules for converting requisitions into purchase orders automatically show the conditions clearly. The material and the supplier must both be flagged as allowed for automatic orders. The system must find one valid source of supply. A price must come from a purchasing info record or an agreement. The requisition must be approved and not blocked, and every required accounting field must be filled. If any condition fails, the requisition waits for a buyer.
The same holds for any product: automation depends on good master data. If most requests are free text with no supplier or price, the system cannot order on its own, and a buyer must still choose the source. Raising the share of requests that come from catalogues and contracts does more for automation than any feature. Ask each vendor what share of your current requests their automation could handle, using a sample of your own requisitions.
- A requester picks 20 boxes of printer paper from the internal catalogue, which points to a framework agreement.
- The requisition is approved under the cost centre’s limit.
- The system finds one supplier and one price in the agreement and creates the PO.
- The PO is sent electronically, and the supplier’s acceptance updates its status.
- The goods receipt and the invoice are matched against the PO without a buyer touching it.
How do you choose purchase order software?
To choose purchase order software, start from your order volumes and from where the order must connect: the requisition before it, the supplier, and the accounting system that pays the invoice. Then test a short list on your own cases. The steps below are shorter than a full procure-to-pay selection because the scope is the order itself.
- Count orders per month, the number of people who order or approve, and the share of invoices that already carry a PO number.
- Decide where orders must be born: from requisitions, from stock levels, from contracts, or typed by buyers.
- Write your approval rules: amounts, categories, budgets, and what happens when an approved order changes.
- List how your main suppliers want to receive orders and send confirmations: email, portal or electronic message.
- Decide which system records receipts and processes invoices, so that the PO, the receipt and the invoice meet in one place.
- Run your test scenarios with two or three products, on a trial set up with your own suppliers and items.
- Compare the cost over the contract term: subscription, users, implementation, integration and supplier fees.
Prices vary by type. Accounting software includes POs in some plans: QuickBooks Online, for example, offers them only in its Plus and Advanced plans. Among dedicated tools, Precoro publishes plans billed annually from $499 a month, while Procurify prices on quote. Suite vendors quote on request. Ask every vendor to price the same scope and number of users, and add the internal time needed to load suppliers, items and approval rules.
Which scenarios should a purchase order software demo cover?
A demonstration is useful only if it follows your cases, not the vendor’s script. The scenarios below test the parts of the order’s life where products differ most. Replace the items and amounts with your own.
| Scenario | Expected result | What it checks |
|---|---|---|
| An approved PO for €4,800 is changed to €5,600, above the approver’s €5,000 limit | The new version goes back for approval; the old version stays visible | Change orders and re-approval |
| The supplier accepts the order but moves the delivery date by two weeks | The buyer sees the change and accepts or rejects it; the PO shows the agreed date | Supplier answer and change control |
| 8 of 10 items arrive, then the other 2 a week later | Two partial receipts; the PO stays open until the second one | Partial receipts and open-order status |
| A blanket agreement for cleaning products has a ceiling of €20,000 for the year | Each release reduces the remaining amount; a release above it is stopped | Agreements, releases and ceilings |
| The invoice quotes the PO number but bills 5% more than the PO price | The invoice is held as an exception and routed to the buyer | Invoice link and tolerances |
| An invoice arrives for an order that was never raised | A PO raised after the invoice is flagged and reported | After-the-fact orders |
| One line of a five-line order is cancelled before delivery | The line is cancelled, the supplier is told, and the commitment drops | Line cancellation and dispatch of changes |
| At year end, 40 orders are more than six months old with nothing received | A report lists them by owner, and each can be closed with a reason | Open-order report and closure |
Run the change, partial receipt and invoice scenarios first: the screen that creates a new PO looks much the same in every product.
Ask for each scenario to run live, on a test environment with your approval rules. If the vendor cannot run a scenario, or only after future configuration, the product does not do it today. The same scenarios work in a formal tender: the RFP guide explains how to build the request and score the answers.
What is the best purchase order software?
No purchase order software is best for every organisation. A shop with one buyer can use the PO feature of its accounting software. A company with 300 occasional requesters needs approvals, budgets and receipts that a dedicated tool or a suite provides. A manufacturer ordering against production plans needs ERP purchasing with agreements and automatic orders.
Use rankings and review sites to build a long list, then read who writes them and who pays for them. Decide on what your own scenarios show: whether changes are controlled, whether suppliers can answer, and whether the PO, the receipt and the invoice meet in one record. If you have no system yet, a numbered template and a register are a sound first step; the order fields to include are described in what is a purchase order.
Questions
Is a purchase order system the same as procure-to-pay software?
No. A purchase order system manages the order itself: creation, approval, dispatch, changes, receipt and its link to the invoice. Procure-to-pay software covers the whole cycle from requisition to payment, including catalogues, invoice capture, matching and payment preparation. Many P2P products include a full purchase order system.
Can Excel be used as a purchase order system?
Yes, for a few orders a month: a template with a sequential number and a register of orders sent. It becomes risky when several people order, because numbers can be duplicated, approvals are not recorded with the order and nobody sees open orders. That is usually the point to move to a system.
Does QuickBooks have purchase orders?
Yes. According to Intuit’s help pages, purchase orders are available in QuickBooks Online Plus and QuickBooks Online Advanced. Once the vendor accepts a purchase order, it can be added to a bill or an expense, and QuickBooks closes it. Check the current plan details, because features and plans change.
What is purchase order management software?
Purchase order management software is another name for purchase order software. It tracks each order from creation and approval to the supplier’s answer, receipt, invoice and closure, and reports what is still open. A separate guide on purchase order management as a practice is in preparation.
How much does purchase order software cost?
It depends on the type. PO features come with some accounting software plans; dedicated tools are yearly subscriptions, a few with published prices such as Precoro from $499 a month billed annually; ERP modules and suites are quoted on request. Add implementation, integration and supplier onboarding to compare the full cost.
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