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A purchase order helps you track inventory, monitor your budget, and obtain products in a streamlined process.
While established fashion brands typically have their own templates and integrated purchase order systems, creating your own purchase order template is crucial for start-up fashion brand owners and freelance fashion designers.
In this article, I’ll share practical tips for creating effective purchase orders that will keep you organized. Drawing from my 15+ years of experience working in the fashion industry, I’ve also crafted a free, customizable purchase order template ready for your next transaction!
A purchase order (P.O. in short) is a legally binding document between a buyer and a vendor. It’s an official request to buy products at an agreed upon price.
A P.O. includes important details like quantities, delivery dates, payment details, and other conditions. By laying out these specifics, purchase orders help both parties stay clear on the agreement, ensuring smooth transactions and reducing misunderstandings.
A purchase order is issued by the buyer to the vendor, specifying the items, quantities, and agreed upon prices. Think of a P.O. as a wish list – it’s a request to buy goods sent before production begins. In contrast, a payment invoice is like a bill – it’s issued by the vendor to the buyer after the goods have been delivered, requesting payment.
Essentially, the purchase order is the cart full of items, and the invoice is the cashier ringing up the sale.
Here’s the thing: producing garments involves many moving parts, and unforeseen changes can happen along the way.
A P.O. helps vendors confirm that they have the necessary materials and capacity before production starts. For example, upon receiving the P.O., vendors need to check with their own suppliers to confirm that raw materials are in stock.
And even after purchase order approval, it’s pretty common to get a slightly different final quantity. This isn’t always a mistake, as a +/- 5% variance is common in garment manufacturing due to material constraints or overproduction for quality control.
The purchase order sets the initial agreement, aligning the buyer and vendor. The purchase invoice, issued after delivery, confirms the actual goods delivered and final payment.
So, yes, you need both a purchase order and a purchase invoice to go about your business.
It’s the buyer’s responsibility to fill out and forward the purchase order and this ultimately kickstarts the production process.
Here’s a step-by-step guide on how the purchase order process works:
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Once the final samples are approved, a purchase order is generated by the buyer. The purchase order should include all necessary details, such as item descriptions, quantities, prices, and delivery dates (more on this later!).
The purchase order is then sent to the vendor for review. This allows them to confirm costs and check if they have the capacity to produce the requested items.
Multiple companies are usually involved in a single production run (material suppliers, logistics, etc.), so your vendor needs to double-check pricing and stock availability and raise any discrepancies. At this point, negotiations or changes may occur, and the buyer needs to approve all of these changes.
For example, I’ve had instances before where a requested material color went out of stock, so we either had to choose alternatives or request a new fabric run with higher minimums. Material suppliers may also adjust their pricing out of the blue. All of these should be reflected in the final P.O.
Once everything is agreed upon, the vendor accepts the purchase order and may request a downpayment. Payment terms vary by vendor and depend on their relationship with the fashion brand. Some vendors require full payment before delivery, while others, especially with long-term clients, may accept full payment after delivery.
In my experience, most factories are willing to do a 50% down payment to start the order, and the remaining 50% before shipping. As you build up trust with your suppliers, you may be able to negotiate ⅓ at start, ⅓ at shipment, and ⅓ after receipt. After even more time and more trust, it is even possible to negotiate net 30 or 60, meaning you don’t pay anything until 30 (or 60) days after the product is received.
After payment is received per the PO terms, the vendor begins fulfilling the order. At this point, prices for materials and labor per item should remain fixed, provided that the payment deadlines are met. P.O.s typically include response deadlines for both buyer and seller to ensure timeliness and “lock-in” prices.
When the production is done, the vendor will send an invoice requesting for the final payment. As I mentioned earlier, final pricing may vary due to over/under production, but raw material costs should already remain constant at this point. If everything is good, the buyer settles the rest of the payment.
Here’s a preview of my free P.O. template and a quick walkthrough of the parts:
The header section should include important identification info for the purchase order. This includes your company details, which helps the vendor easily recognize the source of the order.
It also includes the P.O. number and target delivery date for tracking and scheduling. Adding the buyer’s name (or whoever was in charge of preparing the P.O.) and contact details ensures quick communication if any issues arise.
Here’s a quick list of information to include in the header:
This section provides all necessary information about the vendor, such as their company name, business address, and contact person. P.O.s often get passed around, so having these details readily available ensures there is no confusion about who the order is from and who to contact for clarifications.
Here’s a quick list of information to include in the vendor details:
Here, you specify the destination for the order. I also included the company name and shipping address here (despite having them in the header) because in some cases, the receiving company name and shipping address may be different from the fashion brand’s business name and address.
You can also put your preferred shipping method here (i.e. sea or air shipping) to let the vendor know in advance.
Here’s a quick list of information to include in the shipping details:
This is the “meat” of the purchase order where you need to list all the items being ordered. Each product should be detailed with its identification number along with the product details, quantity and pricing information.
Here’s a quick list of information to include in the order details:
Use this section for any special terms or conditions related to the order. This could include specific delivery instructions, quality requirements, or any other relevant details that need to be communicated to the vendor.
A note like “Full payment is contingent upon the buyer’s approval of goods meeting specified quality standards upon delivery.” ensures you can check the quality before making the final payment, protecting you from accepting poor-quality items.
Just make sure these terms are fair and agreed upon by both parties beforehand.
Need something more for your fashion brand? Here are other templates I developed to help you kickstart your development process. (100% FREE!)
