When do I need to create a purchase order?

A purchase order is created when you need to buy items for your business. It is a financial document issued to the vendor. It predominantly contains the product details, quantity and the price agreed for the product.

Ex: You run a furniture business and you need a special wood to make a particular model. Currently you do not have the wood in your stock, at this instance you raise a purchase order to your vendor who supplies you with the special wood.