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In this video, Theo from BuildersDocuments.com demonstrates how to use a purchase order template, a simple spreadsheet for entering contractor and supplier information. He emphasizes the importance of issuing purchase orders, particularly for those just starting out. Initially, he viewed them as unnecessary, believing that verbal agreements were sufficient. However, he highlights that purchase orders serve as a crucial reference document for both contractors and builders, clarifying the specifics of their contract price and ensuring clear communication throughout the project.