What is a PO number? A guide for procurement teams

Your procurement team has a lot to juggle. First, you have to monitor order statuses to make sure they’re on track and haven't hit any setbacks. You also need to verify vendor contract compliance while looking for potential supply chain disruptions. Along with all this, you should strive to optimize orders across suppliers. 

Altogether, it’s a difficult task—but it’s easier when you leverage purchase order (PO) numbers to stay organized. 

PO numbers help you tell orders apart. You can look up each order’s status and compliance without spending valuable time digging into historical tracking data. They’re crucial to procurement efficiency, compliance, and spend management—the trick is learning how to manage them effectively. 

With an intentional and strategic approach, you can transform PO number management into a recipe for success across your procurement operations.

What is a PO number?

A PO number is an alphanumeric code that procurement teams assign to an individual purchase order. Each one is unique to a specific transaction. Procurement teams use these codes for order tracking and general organization throughout the procurement workflow. 

Here’s how the process works: 

1. Your accounts payable team approves a purchase requisition.

2. A buyer creates a purchase order and generates a PO number at the same time.

3. With the PO ready, the buyer sends the document to the seller. 

4. The seller accepts or denies the PO. 

5. If they accept the PO, the seller begins fulfillment. The PO is now a legal document that binds both parties to the agreement.

6. The buyer and procurement team can now use the PO number to track the shipment.

Key components of a purchase order

You can expect to find these components in the average purchase order:

• Buyer and seller contact information: Both parties’ names, billing addresses, and contact details

• Order details: Expected delivery date, PO creation date, shipment method, tax information, agreed-upon prices, and a detailed description of goods or services

• Payment terms: Due dates, payment process or method, and any contracted pricing discounts that apply to the order

• Delivery instructions: How, when, and where the seller should deliver the goods or services or if the delivery requires a signature
   

Whether you operate a robust procurement system or a small business with only a handful of orders, purchase orders are a key part of your business operations.

Key differences between purchase orders and sales invoices

A purchase order isn’t the same thing as a sales invoice. While both documents outline a shipment’s conditions, they serve different functions. 

A purchase order lays out expectations for the purchase and captures important order information, per contract terms, and both parties need to fulfill their end of the deal. On the other hand, a sales invoice is what the seller sends to the buyer to request payment after delivering the order. 

The benefits of PO numbers for large-scale procurement

If you deal with large-scale procurement operations, you’ll also have to manage multiple contracts across several vendors with unique orders for each one. That’s a lot of moving parts to track. However, leaning on PO numbers to keep your orders organized eliminates much of the headache from manually managing huge sums of purchasing data. 

These are a few of the most impactful benefits of using PO numbers:

• Financial tracking: Optimize your finances, source opportunities for cost savings, and increase cash flow by tracking every dollar you spend.
  
• Budget control: Create an accurate cost breakdown for each order so you can create realistic budgets and stay within them.
  
• Inventory management: Track inventory coming in and going out to know your precise inventory needs and order efficiently.
  
• Compliance: Understand what happens at every step of the order lifecycle to verify vendor contracts and industry regulatory compliance.
  
• Supplier relationships: Save both parties time and money through good communication, accountability, and a reliable process.
  
• Operational efficiency: Keep all your orders organized to avoid bottlenecks, duplicate payments, and discrepancies.
   

From risk mitigation to cost control, PO numbers reward those who use them by organizing their procurement process and pulling more value from their procurement data.

How to create and manage PO numbers effectively

You know how PO numbers keep your procurement process organized—but the next step is learning how to create and manage them for your team. 

Key elements of PO numbers

Use these three elements to give each order a unique PO number:

• Sequential number: Every purchase order should have a unique PO reference number to identify it as a distinct document.
  
• Prefix/identifier: Located at the beginning or end of the sequential number, the prefix or identifier helps an organization categorize orders.
  
• Date: For additional clarity, some teams will add the PO creation date to the number.
   

These components differentiate one PO from another and help you keep accurate records.

Manual vs. automated PO number generation

There are two ways to generate PO numbers: manually and automatically. Depending on the scope and scale of your operations, one option may be better than the other.

Here’s what it looks like to use both options so you can decide which is best for you:

Manual PO number generation

If you manage a small procurement network with few business transactions, creating PO numbers by hand can work well. Rather than leveraging software to assign numbers, you can do it yourself. 

However, while you’ll get more hands-on time with each order using this method, manual processes are prone to human error and tend to lack security. 

Automated PO number generation

For large-scale procurement workflows, or if you want to expand your current network, automatic PO number generation is necessary. Automation not only saves time but also minimizes the risk of human error, missing POs, and duplicate payments.

To automate PO creation, you can leverage software like enterprise resource planning (ERP) systems, accounting software, or end-to-end solutions like Amazon Business to assign numbers to each PO automatically. 

A sign of a top-notch PO system is its ability to integrate with your existing systems. When your inventory management, invoicing, and PO software solutions talk to each other, it promotes data accuracy and purchasing visibility.

Best practices for standardizing PO numbers

Procurement teams and buyers across the organization need to label and structure POs the same way. This is all the more reason to implement these go-to best practices to standardize your PO number system:

• Establish purchase order templates: Choose how you’ll structure each PO number, such as sequential-identifier-date or prefix-sequential-date, and stick with it.
  
• Add team-specific identifiers: Designate a unique identifier for each procurement team and make it part of the PO number for their orders.
  
• Ensure transparency: Keep every stakeholder on the same page to eliminate the risk of duplicate orders, create accurate budgets, and reduce rogue spend.
  
• Automate the process: Roll out an automatic process that reduces errors, boosts efficiency, ensures consistency, and saves everyone time.
   

PO numbering does little good for your operations if the label conventions look different on each order. Keeping PO numbers clean, coordinated, and consistent allows you to make the most of them.

Ensuring PO accuracy and avoiding common errors

Standardizing your PO process is the first step to ensuring accuracy. The next step is implementing these risk management techniques to avoid common errors:

• Establish clear approval processes: Ensure that every stakeholder follows the same steps to create and approve POs for accuracy across your organization.

• Store all POs in one place: Centralize PO record-keeping for transparency and easy access when running budget or compliance audits. 

• Audit PO records regularly: Check your PO records periodically to ensure they’re complete and accurate.

• Designate roles to avoid bottlenecks: Delegate responsibilities to stakeholders so multiple people aren’t doing the same task.

• Automate two-way and three-way matching: Leverage software to instantly run two- and three-way matching for POs and invoices.

Your efforts to stay organized and avoid costly risks early in the procurement process will trickle downstream to boost organization-wide efficiency and accuracy.

The future of PO number management in procurement

As procurement technology evolves, so does your organization’s ability to bolster purchase order management. Because of this, the following procurement trends are worth your attention:

AI and predictive procurement

AI is an emerging technology that’s revolutionizing how organizations manage procurement. Most notable is its impact on predictive procurement.

Predictive procurement leverages advanced data analytics and AI to forecast needs and pinpoint potential challenges. A team that uses this technology to predict future consumer demand or market conditions is more agile and resilient. However, because AI takes in your historical data for its assessment, it needs accurate data—down to each PO line item. 

To take full advantage of AI and predictive procurement, you have to know where your organization stands now. PO numbers track your current purchases to grant this insight.

Blockchain and PO tracking

More and more organizations are using blockchain technology for PO tracking. A decentralized method of linking transaction records in chronological order, blockchain provides procurement leaders with clear, accurate insight into each shipment. 

Blockchain works for PO tracking because it updates in real time as an order moves from point A to point B. It also houses data from every step of the process. In other words, you’ll get the most accurate order tracking and purchasing data possible.

If a problem comes up, your team will know about it instantly. They won’t need to dig through tons of order history data to find where a shipment is and what went wrong, which saves everyone valuable time and money.

Enhanced integration with supply chain technology

Findings from our 2025 State of Procurement Report revealed that 32 percent of procurement decision-makers list supply chain disruptions as a major risk factor for their organizations. Because of this, it’s now more important than ever for procurement teams to maintain a tight grasp on their network while remaining agile—but to do so, you’ll need powerful supply chain technology to aid in your network’s optimization.

An optimized supply chain means working with just the right amount of suppliers to minimize stops and get orders to their final destination as efficiently as possible. PO numbers are what capture stops, routes, or delays for each of these orders. If you aggregate this PO number data, you’ll get a picture of your current supply chain. 

Integrating your systems with robust supply chain technology to analyze PO number data can help you uncover opportunities to make your network more efficient. That way, you’ll find out quickly if a particular route is often interrupted or if vendors are routinely late in sending orders. Supply chain tools are becoming increasingly sophisticated, so be sure to use them to shed light on how you can optimize your supply chain and control costs.

Automatic PO number creation: Optimizing your workflow across the board

PO numbers keep your operations organized from start to finish. When you centralize them, your team can easily find valuable data points for each order. That way, you can easily track every order’s movement, and find patterns that may point to a larger, more costly problem. 

The key is housing all this functionality within one intuitive central location—and that’s where Amazon Business steps in. From robust metrics to automated PO number generation, our solution offers valuable resources to support your organization and its procurement optimization goals. 

Talk to one of our experts today to explore solutions that can streamline your purchasing and PO management.