Comparing Purchase Order vs Invoice vs Sales Order

difference between purchase order and invoice

Purchase invoices with the account of accounts payable and accounts receivable can be important financial documents for both the buyer and seller. After the buyer has provided the vendor with a purchase agreement and the order has been verified and completed, the buyer will next produce a purchase invoice to reflect the transaction. It includes the same inventory management information as a standard invoice and a deadline by which the buyer owes to pay the vendor. Typically the purchase requisition goes through an approval process.

difference between purchase order and invoice

A purchase requisition is a document used internally within a single company. In a purchase requisition, one department asks another for permission to buy goods or services from an external vendor. If the purchase requisition is approved, the company will submit a purchase order. You want to ensure everything is crystal clear when you send a purchase order.

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A purchase order is used to make a purchase, while an invoice is meant to collect money from a buyer or client. Typically, a person within your business will need a particular item or a service to be provided. They may then make a formal request for the purchase of these goods or services.

  • The information on a PO often includes the list of items that a buyer would like to purchase, quantities for each item, and agreed-upon prices.
  • Purchase invoices with the account of accounts payable and accounts receivable can be important financial documents for both the buyer and seller.
  • In many cases, licensing fees, permits, refunds, and even federal taxes are categorized as non-PO expenses.
  • An invoice contains the previously agreed-upon amount, which the buyer must now pay once the order is fulfilled.

Both are communications regarding goods and services that are tied to commerce. A purchase order is typically signed by both the buyer and the seller, while an invoice is typically signed by the seller only. Keeping track of your invoices protects you and your business, and it makes auditing and settling your accounts easier later. Learn how to overcome AP issues by optimizing your purchasing process
for today’s business reality. Although a purchase order and an invoice contain much of the same information, they provide two distinct purposes.


Each item or service is listed on the invoice along with its price and the total amount due. If there are any changes to the original order, a purchase order can serve as a reminder of what was originally requested. This can help avoid any confusion or miscommunication between your organization and the supplier. For example, you risk generating duplicate requests and losing money if you don’t have a purchase order in place.

  • Moon Invoice has user-friendly, adaptable, and industry-specific invoicing software.
  • Purchase orders and invoices are two crucial documents in every company’s procurement procedure.
  • Most importantly, purchase orders and invoices have two distinct purposes.
  • Therefore, the invoice is used to show what was sold, how much money it cost, whether any payment has been posted already, and what outstanding charges are present.

Good recordkeeping is a critical part of any business, especially the purchase and procurement process. However, it’s very easy to damage, lose or destroy a paper-based system. This makes them extremely useful for any business or person who routinely buys goods or services. They help you lock in specific details of every transaction you have with your business. Purchase orders are important for any buyer who wants to get services or goods from a supplier, vendor, or seller.

Place an order for goods or services

Invoices are particularly useful for businesses that offer services with varying costs due to hourly rates or other complexities. They allow you to clearly detail each service performed and its corresponding cost. In summary, using a purchase order provides clarity between both parties in a procurement transaction while reducing errors from miscommunication or lack of documentation. In this article, we’re going to clarify the differences so that you can get a better understanding of what’s what and when to use each of them in your own business transactions.

difference between purchase order and invoice

Therefore, non-PO invoices go through an invoice approval process within an organization before being paid. Once matched, a business pushes PO invoices to an ERP or accounting system for payment. The business produces a purchase order (PO) after the purchase requisition is approved. The business provides the purchase order to the vendor awarded the business. To fully understand the difference between PO invoices and non-PO invoices we must first explore the difference between PO and non-PO purchasing of goods and services.

What Is The Difference Between Purchase Order And Invoice?

For one the POs are prepared for the buyer, while the invoices are created by the seller. The invoice includes the price of the order, the terms/ conditions of payment, and the payment due date. On the other hand, the PO describes the order details and delivery date of the order. The seller generates the PO as soon as the customers place an order, but the invoice is created after the order is complete.

  • It acts as an official agreement between buyer and seller, authorized by the management of both companies.
  • The purchase order number is primarily used for accounting purposes, helping financial personnel monitor expenses.
  • A PO allows the purchaser to explain their needs fully to the vendor.
  • Both entities can use the PO to track and manage the procurement process.
  • Since it’s pre-approved, no further approvals are required, and the invoice can be processed quickly.
  • With a purchase order for goods and services, you might not need a separate contract for the particular transaction.

Since POs are legally binding, they do not require a separate contract. Now that you understand the difference in purchase orders vs invoices, you might wonder whether companies need both of these documents. Most importantly, purchase orders and invoices have two distinct purposes.

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