Purchase order

Definition

A customer's written order for goods or work, priced, with no long contract.

Why It Matters

Revenue that arrives by purchase order re-competes on every order, so a customer list is not a contract book however loyal it looks: the screen is what share of revenue is contracted versus ordered, and how long the ordering relationships have actually run. It is also a word buyers trip on at the worst moment, because the purchase agreement that buys the company is a different document entirely, and diligence requests that confuse the two waste a week.

In numbers: A machine shop doing $1.8M a year where 80% arrives as purchase orders from three customers is a concentration screen and a re-compete risk in one number.