Quote to Cash · step 5 of 11
Receiving the customer's purchase order
The customer commits. Before anyone celebrates, the purchase order has to be read line by line against the quotation it claims to accept — because the two disagree more often than anyone expects.
Also called: Order receipt · PO intake · Contract review · Order acceptance
- Owned by
- Inside Sales / Sales Coordinator
- Also involved
- Account Manager, Credit Controller, Production Planner
- Documents
- Purchase Order (PO), Quotation
- Measured by
- On-Time Delivery (OTD), Gross Margin
What it is
The purchase order is the customer's instruction to supply: this part, this quantity, this price, this date, on these terms. In most cases it is the acceptance that turns your quotation into a contract, and in many cases it also quietly attaches the customer's own conditions to it.
This step is a review, not an administrative one. It is the last point at which a mismatch costs a phone call rather than a credit note. What is being checked is whether the order the customer has placed is the order you priced.
In quality-managed businesses this is a formal requirement — ISO 9001 calls it review of requirements for products and services, and expects it to be recorded before you commit. Most companies do some version of it whether or not they call it that.
Why companies do it
A purchase order is written by a different person, in a different system, sometimes weeks after the quotation, often by copying an older order. Prices get carried over from last year, quantities get rounded, revisions get missed, dates get set by an MRP run rather than by anyone who spoke to you. Accepting all of that silently means you have agreed to it. Reviewing it means the disagreement happens now, while it is still free.
Inputs and outputs
What has to be there first
- The customer's purchase order — Purchase Order (PO)
- The quotation it is accepting, at the correct revision — Reviewing and issuing the quotation
- The negotiated concessions and their conditions — Negotiation and revised offers
- Credit status and available exposure — Credit Controller
- Current capacity and realistic promise date — Production Planner
- Material and outside process lead times — Purchasing
What it produces
- An accepted, rejected or queried order — Order entry
- A written order acknowledgement — Customer purchasing
- A recorded contract review — Quality records
- A confirmed promise date — On-Time Delivery (OTD)
The date the company will be measured against for the rest of the chain.
How it is done
01Match the order to a quotation
Find the quote it accepts, at the revision it accepts. If the purchase order references no quotation at all — common on repeat business — establish which price list or agreement it is being placed under before anything else happens.
02Check price, quantity and part revision line by line
Three numbers, checked against the quotation, on every line. This is where most of the value of the whole step sits. A price carried over from last year and a superseded drawing revision are the two that cause the most expensive failures, and both look completely normal on the page.
03Check the quantity against the price break
If the order is for 100 and the price was quoted at 250, the price on the order is wrong even though it matches the quotation. This is not the customer being difficult — it is the assumption from costing finally being tested.
04Check the dates against capacity
Customer MRP systems generate dates from their own planning, not from your lead time. Confirm the requested date is achievable before acknowledging it. If it is not, say so now — a date accepted in silence becomes a date you have promised.
05Read the terms on the back
Payment terms, retention, liquidated damages, warranty period, liability caps, packaging and labelling requirements, right to audit. Purchase orders routinely carry conditions nobody in your company has agreed to. Silence is normally taken as acceptance.
06Check credit before committing capacity
Confirm the account is within its limit and not on hold, and that this order does not breach the exposure agreed for a new customer. Finding this out after the material is cut is the expensive version.
07Acknowledge in writing, with your terms and your date
Send an order acknowledgement stating the part, revision, quantity, price, delivery date and your conditions of sale, and objecting explicitly to anything on the customer's order you do not accept. This is the step that decides whose terms govern the contract, and it takes a template and five minutes.
08Query anything that does not match, in writing
Do not correct the customer's order quietly in your own system. If the price is wrong, tell them and get an amended order. An order entered differently from how it was placed will be invoiced differently from how it was approved, and it will not be paid.
What needs approval
Approvals only work when they happen before the commitment. Retrospective approval is a manager being told what has already been promised.
| Trigger | Approver |
|---|---|
| Order price differs from the quotationNever absorbed silently, in either direction. | Sales manager |
| Customer's terms and conditions attachedEspecially liquidated damages, unlimited liability and extended warranty. | Commercial |
| Account over its credit limit or on hold | Credit control |
| Requested date not achievableAgree a date you can hit before acknowledging one you cannot. | Operations |
| Order references a superseded drawing revision | Engineering |
A routine purchase order with three defects
A worked example with real numbers.
The bracket order arrives eight weeks after the negotiation closed. It looks completely normal: the customer's standard form, the right part number, a familiar buyer's name.
The review finds three things. The quantity is 400, matching what was agreed — but the unit price on the order is £18.70, the list price for 250, not the £17.20 agreed for 400. In the customer's favour to correct, and correcting it silently would have meant invoicing £600 less than the order authorised, which their system would have accepted and their auditors would have queried.
The drawing revision on the order is D. The quotation was priced against revision C. Engineering confirms revision D moved a tolerance from ±0.2 to ±0.05 on one feature, which needs an extra operation. That is a requote, not an administrative fix.
The requested delivery is 14 days. The quoted lead time was 4 weeks and the anodising queue alone is 10 days. Accepting that date would have meant failing it.
None of the three was visible without a line-by-line comparison. All three are resolved in one email; the customer issues an amended order at £18.95 for revision D with a 28-day delivery, and the order is acknowledged the same day.
| Field | On the purchase order | On the quotation | Action |
|---|---|---|---|
| Quantity | 400 | 400 | Matches |
| Unit price | £18.70 | £17.20 at 400 off | Query — customer's error in our favour |
| Drawing revision | D | C | Stop — requote, tolerance changed |
| Delivery | 14 days | 4 weeks | Reject date, offer 28 days |
| Payment terms | 60 days | 30 days | Query — not agreed |
| Terms attached | Customer's standard conditions | Ours referenced | Object in acknowledgement |
The point
Five minutes of checking prevented a part made to the wrong revision, a delivery date that could not be met, thirty days of unagreed financing, and a set of terms nobody had read. The cost of finding each of those later runs from a phone call to the entire margin on the order.
Common mistakes
MistakeAccepting the order without reading it
Why it happens: It is good news, everyone wants it in the system, and reading a purchase order is nobody's favourite task. The mismatches are found later by production, or worse, by accounts receivable.
What to do instead: A short, fixed checklist — price, quantity, revision, date, terms, credit — signed off before entry. Six checks, five minutes, and it prevents the majority of downstream disputes.
MistakeSilently correcting the customer's price
Why it happens: The order says £16.50 and the quote said £18.70. Someone enters £18.70 because it is 'obviously' right. The invoice goes out at £18.70, the customer's system expects £16.50, and payment stops.
What to do instead: Never enter anything other than what the order says. Query it, get an amended order, then enter that. The invoice must be able to match the order the customer approved.
MistakeNot acknowledging the order
Why it happens: Nobody chases an acknowledgement, so it stops happening. Then the customer's terms apply by default, their date is the promised date, and there is no written record of what was agreed.
What to do instead: Automatic acknowledgement on every order, carrying your date and your terms. It is the cheapest contractual protection available and most companies simply do not send it.
MistakeMissing a changed drawing revision
Why it happens: The order says revision E; the quote was priced on revision C. The revision letter is one character on a dense page and nobody is looking for it.
What to do instead: Make revision a mandatory field in the check, and stop the order when it differs. A revision change is a requote, not a formality.
MistakeAccepting liquidated damages without reading them
Why it happens: They sit in clause 14 of terms attached to a PDF nobody opens. The first anyone knows is when a late delivery generates a deduction larger than the margin on the order.
What to do instead: Anything with a penalty attached goes to whoever can bind the company, every time, regardless of order value.
MistakeCommitting capacity before checking credit
Why it happens: Sales and credit control work in different systems and the order is urgent. Material gets bought for a customer who is already on stop.
What to do instead: Credit check is part of order acceptance, not part of invoicing. It happens before the promise, not after the cost.
Where the work happens
- ERP sales order module
- Customer EDI or portal feeds
- Credit control system
- Document control for drawing revisions
Terminology
- Purchase order
- The customer's formal instruction to supply, normally carrying its own number that must appear on every later document.
- Order acknowledgement
- The supplier's written confirmation of what will be supplied, when, and on whose terms. The main mechanism for keeping control of the contract.
- Contract review
- The formal check that you can meet what has been ordered before you accept it. A requirement of ISO 9001 and a good idea regardless.
- Blanket order
- An order covering an agreed total quantity over a period, against which individual deliveries are called off.
- Liquidated damages
- A pre-agreed sum payable per day or week of delay. Enforceable if it is a genuine estimate of loss rather than a penalty.
- Retention
- A percentage of the invoice value withheld until an agreed milestone, common in construction and capital equipment.
- Credit limit
- The maximum outstanding balance allowed on an account. Orders that would breach it should stop here, not at invoicing.
Common questions
›Is a purchase order a contract?
It is usually an acceptance of your quotation, which forms one — or, where it introduces new terms, a counter-offer that you accept by acknowledging it or by starting work. Either way a contract normally exists without anyone signing anything, which is precisely why the review matters.
›What should you do if the purchase order does not match the quotation?
Query it in writing and ask for an amended order before entering it. Do not correct it in your own system. The invoice you eventually raise has to match the order the customer's accounts payable department approved, or it will not be paid on time — and possibly not at all.
›Do you have to send an order acknowledgement?
Not legally, in most cases. But it is the step that establishes your delivery date and your terms as the ones that govern, and it creates the written record of what was agreed. Companies that skip it are consistently the ones arguing about what was promised.
›What is contract review under ISO 9001?
The requirement to review requirements before committing to supply — confirming they are defined, that differences from any previous quote are resolved, and that you are able to meet them. It has to be recorded. In practice it is the same check described here, with a signature on it.
›Whose terms apply when both parties attach their own?
Broadly, the last set of terms sent and then acted on tends to prevail. Since the customer's purchase order usually arrives after your quotation, doing nothing means theirs apply. An acknowledgement that restates your conditions and objects to specific clauses is how suppliers push back — and it has to be sent before you start work.
›Should you start work before the purchase order arrives?
Sometimes commercially necessary, always a risk you are taking knowingly. If material must be committed on a verbal instruction, get it in writing by email at minimum, and treat the exposure as an approval decision rather than a favour.
Tools for this
Downloadable, self-contained, and yours to keep — they run in a browser with no account and no data leaving your machine.
- Purchase Order TrackerFreeTrack purchase orders from raising to invoice: committed spend by cost centre, overdue deliveries, goods received but not invoiced, and a three-way match that catches duplicate and inflated supplier invoices. Runs entirely in your browser — nothing is uploaded.
- Order Backlog DashboardProSee your open order book as money: backlog value by due week, overdue and at-risk orders, customer concentration, aging and where the value sits in production. Runs entirely in your browser — nothing is uploaded.
Reviewed 2026-08-15. Nothing here is legal, tax or accounting advice — contractual and tax practice varies by jurisdiction.