What is a purchase order? A guide for SA suppliers
A purchase order (PO) is a document a buyer sends you before you deliver anything. It lists what they want, how many, the price you agreed, when they need it and when they will pay. Once you accept it, the PO is the deal, and your invoice has to match it.
If you sell to bigger companies, government departments or municipalities in South Africa, you will get POs. Most of what comes up when you search for purchase orders is written for the buyer: how to raise them, approve them and track them. This guide is for the small business on the other end. That side is where things go wrong, because the PO is where clients check your paperwork, where funders decide whether to back you, and where scammers try their luck.
We see all three in Govchain's support inbox. The stories below come from real conversations with our customers, with names and details removed.
How a purchase order works, step by step
- You send the client a quote.
- The client approves your quote internally and raises a PO with its own reference number.
- The client sends you the PO. Check that the items, quantities, prices, delivery date and payment terms match your quote.
- You accept the PO, in writing or by delivering, and supply the goods or services.
- You send an invoice that quotes the PO number.
- The client's accounts team matches the PO, the signed delivery note and your invoice. Accountants call this a three-way match. If all three agree, you get paid.
A PO is the client's offer to buy on the terms written on it. When you accept it, you have an agreement. So if the PO says payment in 60 days and your quote said 30, or the price has changed, raise it in writing before you deliver, not after.
What's the difference between a quote, a purchase order and an invoice?
Each one comes from a different side at a different moment:
- A quote comes from you, before the client has decided. It says what you will supply and at what price.
- A purchase order comes from the client, after they accept your price and before you deliver. It commits them to buy.
- An invoice comes from you, after you deliver. It asks for payment. If you are registered for VAT (value-added tax), it has to be a tax invoice with the details SARS requires.
Some clients also ask for a pro forma invoice before they raise the PO. That is a preview of the invoice you will send, so their finance team can approve the spend.
What your client checks before sending a PO
Big buyers don't want to pay a supplier who owes SARS (the South African Revenue Service), can't cover an injured worker, or is about to be deregistered. So before the PO goes out, or before it gets paid, their procurement team asks for proof. These five documents are the ones that come up in our support inbox, along with the delays that catch suppliers out.
A tax clearance PIN from SARS
Clients who ask for a "tax clearance certificate" today usually mean a tax clearance PIN. It comes from SARS's Tax Compliance Status (TCS) system. You request the PIN on eFiling, SARS's online tax portal, and give it to the client. They log in to their own eFiling profile, enter the PIN and see whether you are tax compliant.
The check shows your status at the moment the client uses the PIN, not the day you created it. A PIN you sent in March can show "non-compliant" in June if a return has gone in late since then.
One supplier came to us with a funder ready to back an order worth almost R400,000. The funder wanted a tax clearance PIN before it would release any money. When the supplier logged in, their dashboard showed company tax returns still outstanding, and those had to be filed before the status could turn green. Another supplier was due to be paid by a municipality at the end of the month. A few days before, they found out their SARS status was non-compliant. The overdue returns were filed within 48 hours, but it was close.
A COID letter of good standing
COID is short for the Compensation for Occupational Injuries and Diseases Act. Employers register with the Compensation Fund at the Department of Employment and Labour and pay a yearly assessment, which covers their workers if they are injured at work. A letter of good standing proves you are registered and paid up. Construction, security, cleaning and government clients often won't let you start without one.
The letter expires every year. You renew it by submitting your annual Return of Earnings, a statement of what you paid your staff, and paying the assessment.
A professional services firm told us a client had stopped issuing POs until the firm had its letter. The registration had gone through weeks earlier. But the assessment, about R1,400, had never been paid, because the email asking for it went to a colleague's inbox. Nobody at the firm knew the letter was waiting on them.
Registration itself is not quick either. In 2021 one registration we handled took more than two months while the Fund's online system wasn't processing it properly. Our guide to the letter of good standing in South Africa explains the whole process, or you can get your Letter of Good Standing through Govchain.
Up-to-date CIPC filings
CIPC (the Companies and Intellectual Property Commission) registers companies and keeps their records. Every company has to file an annual return each year. Since 2024 CIPC won't accept an annual return unless the company's beneficial ownership is on file too. Beneficial ownership means the real people who own or control the company. Companies that stop filing get deregistered, and a deregistered company can't legally trade.
One supplier paid to catch up two years of annual returns and beneficial ownership because a client was holding a PO until it was done. Then the beneficial ownership filing turned out to be locked. Someone had started it from a different CIPC account and never finished. That kind of lock takes up to 30 working days to expire, and nobody can speed it up. Govchain Filings files your annual returns and beneficial ownership on time each year, so you are not catching up with a PO on the line.
CSD registration for government work
Government departments and municipalities buy from suppliers registered on the Central Supplier Database (CSD), which National Treasury runs. The CSD checks your tax status with SARS, your company details with CIPC and your bank account. A problem with any of those shows up on your CSD profile too. If you want government POs, register on the CSD before you start quoting. Our post on getting government contracts in South Africa covers the rest of that process.
A B-BBEE affidavit
Government buyers and large companies score suppliers on B-BBEE (Broad-Based Black Economic Empowerment) when they choose who to buy from. If your turnover is R10 million a year or less, you can prove your level with a sworn affidavit instead of paying for a verification certificate. You can get your B-BBEE affidavit online, and our post on B-BBEE certificates vs affidavits explains which one you need.
None of these can be fixed in a day. Each has a wait you don't control: SARS processing your returns, the Compensation Fund issuing a letter, a CIPC lock running out. Every supplier in these stories started on their paperwork after the PO was already on the table. Start before.
Got a purchase order but no cash to fill it?
A big first order can need more cash than the business has. The client pays 30 or 60 days after delivery, but your own supplier wants paying now.
PO funding (also called purchase order financing) fills that gap. A funder pays your supplier directly so you can deliver, then takes its money back, plus a fee, when your client pays. It is a form of short-term working capital, the cash a business needs to cover day-to-day costs.
Funders look at your client as closely as they look at you, because the client's payment is what repays them. Expect to be asked for:
- the PO itself, signed by the buyer (a quote won't do)
- your supplier's quote for the goods
- your company registration documents and your directors' IDs
- recent bank statements
- a tax clearance PIN
- CSD registration, if the client is a government department or municipality
Ask for the total cost in rand before you sign, not only a percentage. The fee usually depends on how long the money is out, so a client who pays late costs you more. Our guide on how to apply for business funding in South Africa covers other ways to raise money.
How to invoice against a PO so you get paid
The PO controls what you can invoice. A few habits keep your invoice out of the "query" pile:
- Put the PO number on the invoice exactly as it appears on the PO. Without it, the accounts team can't match your invoice to an order.
- Invoice what the PO says. If the client changed the quantity or price, ask for an amended PO first.
- Attach the delivery note your client signed when you delivered.
- Send the invoice to the address on the PO, which is often an accounts inbox and not the person who placed the order.
Government buyers have a deadline. National and provincial departments must pay suppliers within 30 days of receiving an invoice, and National Treasury publishes reports on departments that pay late. Municipalities have a similar 30-day rule under the Municipal Finance Management Act. In practice the clock tends to start only once your invoice and paperwork are complete, which is one more reason to get the PO number right.
If you need an invoice that quotes a PO, Govchain's free invoice generator has a purchase order number field that prints on the PDF.
How to spot a fake purchase order
Scammers know a small supplier gets excited about a big order. Govchain's own support inbox has received dozens of fake POs since 2021, for office supplies, millwork and branded clothing. We sell none of those. They usually read something like: "Kindly confirm the attached PO and send us an invoice so payment can be made today." Many link to a "view purchase order" page that asks you to log in with your email password. That page is the scam. It steals your login.
Government departments get impersonated too. In 2022 the Department of Employment and Labour in the Free State warned that scammers posing as officials were asking suppliers for quotes, then sending fake POs. Some suppliers delivered the goods and were never paid. The Department of Correctional Services issued a similar warning in 2023 to suppliers on its database.
Signs a PO is fake:
- It comes from a Gmail or Outlook address, or a domain that is one letter off. A real Department of Employment and Labour email ends in @labour.gov.za.
- You have to click a link and log in to "view" the order.
- It orders something you don't sell, or far more than the client would normally buy.
- It pushes you to invoice or deliver today.
- The delivery address or phone number doesn't match the organisation's official details.
Before you deliver anything, phone the buyer on a number you found yourself, on their website or the department's switchboard, and ask them to confirm the PO number.
Common misconceptions about purchase orders
"A PO means I will be paid." It means the client has agreed to buy. You still have to deliver what is on it and invoice it correctly. And the PO has to be real.
"My tax clearance from last year still counts." A tax clearance PIN shows your status when the client checks it, not when you created it.
"I'll sort out compliance once I win the work." Every supplier in the stories above tried that. Overdue SARS returns, a COID letter and a locked CIPC filing each take days to weeks to clear.
Questions suppliers ask about POs
Is a purchase order legally binding in South Africa?
Once you accept it, a PO records an agreement between you and the client on the terms written on it. Read those terms before you accept, especially the price, the delivery date, the payment terms and any penalty for late delivery. If anything differs from your quote, agree the change in writing first.
What is a PO number?
It is the reference the client gives the order in its own system. Quote it on your invoice, your delivery note and every email about the order, so the client's accounts team can find it.
What is a blanket purchase order?
A blanket PO covers repeat deliveries over a period, such as monthly cleaning or weekly stock, up to a set total. You invoice against the same PO number each time until the total is used up or the period ends. Keep track of how much is left, because an invoice that takes you over the limit will bounce.
Have your paperwork ready before the PO arrives
The documents that hold up POs are the ones Govchain handles: the tax clearance PIN, the COID letter of good standing, CIPC annual returns and beneficial ownership, and CSD registration. Our team deals with SARS, the Compensation Fund and CIPC for you and follows up until each one is done. The next time a client asks for proof, you can send it the same day.