Local Purchase Order – meaning and what you should know

To make the transaction between a seller and buyer valid, there are several documents involved. One of these documents is the Local Purchase Order.

Basically, this document is prepared by the buyer to show the seller the products he or she intends to buy. In short, the aim of this document is to provide coverage for the seller against any form of incurring losses.

In this article, we will explain explicitly what local purchase order is, and every other thing you should know.

What is Local Purchase Order?

Local Purchase Order which we can also call Purchase Order is a commercial document that is prepared by the buyer to a seller for the purchase of goods and services. In most cases, the seller will issue what we call a “quotation” to the buyer for the supply of the goods. On acceptance of the quotation by the buyer, he or she will then issue a purchase order based on the quote.

Types of Purchase Order

Basically, there are 4 major types of purchase orders. We discuss these below:

  • Standard Purchase Order:

Basically, this type of purchase order is issued out when the buyer is pretty much sure about the order details such as the date.

For example, if a Tech. company based in Lagos decides to purchase 50 computers from a supplier at N5 Million, and they expect them to deliver the order in a month. The Tech. company will have to send a standard purchase order to the supplier, and thus the purchase order becomes a legal document.

  • Contract Purchase Order:

In the business world, we leverage the Contract Purchase Order when the use of a certain product by your business varies with time. In most cases, you can only use this document for a year. This is because it is intended to be used for a specific period.

  • Blanket Purchase Order:

Businesses leverage this document when they know the product to purchase, but do not know in what quantity. In addition, they also use it when they are uncertain of when to use the product

  • Planned Purchase Order:

PPO in short is a legal document that we use when we do not know the delivery date of a product, but other key details are known. In most cases, we use this document for long-term purchases.

Contents of a Local Purchase Order

 We expect that a sample of a Local Purchase Order must contain the following:

  • Buyer’s or Company Name
  • Purchase Order date
  • Vendor Number
  • Purchase order Number
  • The Quantity of Product
  • Product to be delivered.
  • Price Per unit of Product
  • Product Delivery Date
  • The terms of payment
  • Billing Address
  • Location the product is to be delivered.

What are the Importances of LPO?

  • The LPO helps businesses to facilitate the proper preparation of some business documents. This includes a statement of account which is very useful for measuring your businesses’ financial performance.
  • It helps you to keep an accurate record of all the purchases you make. This is very useful in the sense that it will help you guide against duplicating purchases.
  • As a business owner, the LPO will help you manage your business inventory accurately. Mainly because you have the record of all your purchases in a standardized manner.
  • The LPO serves as a binding document. This shields you from any form of dispute that may arise later in the future concerning your purchase.
  • It facilitates a cordial relationship between you and the seller. This is because disagreement is reduced to the barest minimum.


The advantages of a Local Purchase Order are numerous. It is a document every business owner must leverage during transactions. If your business doesn’t use one, now is the best time to start.

By Investmall.co

Leave a Reply

Your email address will not be published.