A Quick Guide To Purchase Order For Services

Most teams have no trouble using purchase orders for material goods. But when it comes to services, the process often becomes less clear.

If that sounds familiar, you’re not alone.

Many organizations skip purchase orders entirely when purchasing services. But here’s the reality: companies with mature procurement functions apply purchase orders to both products and services—and for good reason.

This guide breaks down what a service-related purchase order is, why it matters, and how to implement one effectively.

What Is a Purchase Order for Services?

A purchase order (PO) for services is a formal agreement between a buyer and a service provider. While typically associated with goods, POs can also cover services like consulting, software, and facilities management.

Key components of a PO for services include:

• Purchase Order Number – A unique identifier.
• Date – When the PO is issued.
• Buyer & Vendor Information – Names, addresses, and contacts.
• Price & Payment Terms – Whether fixed, hourly, or milestone-based.
• Taxes – If applicable.

And for service-specific details:

• Description of Services – What’s being delivered and when.
• Scope of Work – Tasks, timelines, and deliverables.
• Confidentiality, Warranties, Termination Clauses – Additional legal terms.

The format can vary, but these are the essential elements that keep everyone aligned.

Why Are Purchase Orders Important?

When used properly, purchase orders protect your organization in several ways:

• Clear Communication – Everyone knows what’s being bought and what’s expected.
• Stronger Documentation – Helpful in resolving disputes or verifying approvals.
• Better Spend Control – Ensures only approved services are purchased and tracked.

What Are the Benefits of Using Purchase Orders for Services?

For companies managing significant service-related spend, using POs can offer several operational benefits:

1. Cash Flow Visibility

With POs in place, your finance team can:

• Accrue expenses accurately.
• Avoid "due-on-receipt" invoice surprises.
• Maintain better forecasting and budgeting.

2. Contractual Clarity

A PO is a legally binding agreement. It documents the terms both parties have agreed to and serves as a point of reference in case of disagreements.

3. Faster Invoice Reconciliation

Without a PO, the AP team has to chase down information—asking departments to confirm if an invoice is valid. A PO eliminates this back-and-forth and helps your systems flag mismatches quickly.

Common Use Cases for Purchase Orders

Broadly, vendor purchases fall into two buckets:

• Tangible Products – Like equipment, office supplies, or inventory.
• Intangible Services – Like software, consulting, or janitorial work.

Tangible Products

These typically follow a standard PO process. Vendors often require a PO before shipment. Adoption rates are high—often 80–90%.

Intangible Services

Services can account for up to 60% of external spend, especially in service-based businesses. Yet, adoption of purchase orders for services remains low.

The issue? Most teams don’t understand how to structure a service PO. That’s where the following best practices come in.

Best Practices for Using Purchase Orders for Services

Let’s look at how to set up a PO in common service scenarios.

Purchase Orders for Software

Software purchases may include licenses, subscriptions (SaaS), or maintenance. Here’s how to structure the PO:

• Item Description: Clearly name the software and its purpose.
• Unit of Measure: Use “Each” for licenses or subscriptions.
• Category: Mark as “Software License” or an equivalent term.
• Type: Classify as a Service, not Material, to avoid unnecessary receipt requirements.

Purchase Orders for Facilities Management

Services like janitorial or landscaping require a different approach. Let’s say a vendor offers cleaning services at $500/month:

• Quantity: 12 (months)
• Unit Price: $500
• Total: $6,000
• Type: Again, mark as Service
• Description: Clearly outline the frequency, scope, and duration.

Pro tip: Use a placeholder like “N/A – Services” in the shipping field to avoid confusion.

Final Thoughts

Just because you’re not purchasing physical goods doesn’t mean your procurement process should skip structure and control.

Whether it’s software, consulting, or facilities management, service purchases benefit from the same rigor you apply to tangible products.

Want help implementing a service PO process that works? At ProcureDesk, we’ve helped dozens of companies take control of service spending without overcomplicating the process.

Let us show you how.

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