A purchase order (PO) is a formal commercial document issued by a buyer to a supplier, authorising the purchase of specified goods or services at an agreed price and quantity. It creates a legal record of what was ordered, when and at what price. In Microsoft Dynamics 365 Business Central, purchase orders link replenishment planning, supplier invoicing, goods receipt and the general ledger in one connected workflow.
How purchase orders work in Business Central
A purchase order can be created manually or generated automatically by the MRP planning engine when stock falls below minimum levels. Once raised and approved it is sent to the supplier. When goods arrive, a goods receipt is posted against the PO, updating stock levels and creating an accrual in the GL. When the supplier invoice arrives it is matched against the PO and receipt in a three-way match, ensuring payment only covers what was ordered and received.
Purchase orders in practice
- A distributor uses Business Central to automatically generate purchase orders at reorder point, eliminating manual stock checks and missed replenishments.
- A manufacturer raises purchase orders for raw materials against confirmed production orders, ensuring materials arrive in time for scheduled production runs.
- A finance controller implements a PO approval workflow requiring manager sign-off on orders above a defined value before they are sent to suppliers.
- An accounts payable team uses three-way matching to automate supplier invoice approval, cutting processing time and preventing duplicate payments.
How Advantage configures purchase order management
Advantage configures procurement workflows, supplier terms, approval hierarchies, replenishment rules and supplier price lists during Business Central implementation, so the purchasing team spends less time on admin from day one.
Frequently Asked Questions
What is three-way matching in purchasing?
A three-way match compares the purchase order, the goods receipt note and the supplier invoice to verify all three documents agree before payment is approved. It is a financial control that prevents overpayment. Business Central performs three-way matching automatically.
Can Business Central automatically create purchase orders?
Yes. Business Central's planning worksheet can automatically suggest or create purchase orders when stock falls below defined minimums or based on sales orders and production requirements.
What is the difference between a purchase order and a purchase invoice?
A purchase order is sent before goods are received. It authorises the purchase. A purchase invoice is the supplier's payment request, received after delivery. In Business Central, the invoice is matched against the original purchase order before posting.
