Purchase Order vs Invoice: 11 Key Differences and Similarities

While purchase orders appear necessary from a legal standpoint, invoices also provide much-needed clarity and can help avoid problems down the road. A purchase order is created before the goods or services are delivered. On the other hand, an invoice is created after the goods or services have been rendered. An invoice lists the items or services that were provided, the price of each item or service, and the total amount due.

First, here’s a brief definition of both PO and non-PO invoices. Join thousands of business-savvy entrepreneurs on our mailing list—and also receive a gift from us. A PO sets certain requirements for the vendors and makes them clear to follow. Save your organization time and effort by automating the billing process, particularly when it comes to recurring billing. Without that documentation in place, the relationship could get messy, which is a problem for both parties. While both have the similarity of being types of commercial communications, the time they occur is different.

What is a PO number?

The business offering the items or services needs to get paid for what it did once the client receives it. Therefore, an invoice is created that lists some of the same information. You can create a new invoice each time, but it might be helpful to have a template made. This should include the PO number, as well as other relevant data.

If the approvals are successful, the invoice payment will be released on the scheduled date and time. When you use an expense management system like Volopay, your whole invoice processing becomes automated and mess-free. Both invoices and receipts are sent by sellers to their customers.

Purchase Order vs Invoice — What are the Differences?

It is the buyer who is responsible for delivering the purchase order. 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 client sends this purchase order to the seller for approval.
• Now you can download the vendor receipt by clicking on the bill.
• The difference in the purpose of a purchase order vs invoice will also be reflected in the person who sends each financial document.
• Invoices are sent out when the terms of a corresponding PO have been fulfilled, e.g., upon delivery of a physical product to the client or when a service was provided.
• Alternatives Know which is the best software in the estimating & invoicing industry.
• As businesses start receiving tons of purchase orders and invoices through avenues like email, fax, snail mail, etc, handling them all manually is time-consuming and error-prone.
• The invoice or bill is how you request payment for the order.

All it takes is a major client to fail to pay on time, and suddenly the business is unable to find the liquidity to pay their bills and keep moving. Standard invoices will include a detailed readout of goods and services delivered and the amount of money owed. A basic Magento POS can work as a cash register to create orders, add discounts and taxes, print receipts, and manage sales. But a complete Magento POS system can assist you with more advanced tasks, such as inventory control, supplier management, loyalty programs, etc. Take a look at the procurement system from Magestore to see why it is a better way to manage your purchase orders and purchase invoices. There might be more types of PO such as special orders for large shipments or recurring purchases.

Invoicing Best Practices that speed up customer payments

Purchase order software can provide these benefits and more, as it digitizes and automates the entire procure-to-pay process from purchase order to invoice. In addition, they contain much of the same information, including order details, mailing information, quantity of goods or services, PO number, and pricing. In fact, the invoice generally contains purchase order vs invoice all of the information from the PO, then adds the invoice number and payment information on top of that. It also must include an accurate billing address and contact information, and any other information that the buyer needs to complete the payment. For example, if the vendor would like a check, it should specify who to make it out to.

• A purchase order comes before the invoice, and the invoice is the supplier’s response to the purchase order—along with the goods and services delivered.
• Companies should use an invoice because it’s easier for the accounts payable and receivable to process vendor payments.
• Visit our Purchase Order Software page to see how Planergy can digitize and automate your purchase order process saving you time and money.
• Invoices are often referred to as “statements,” “sales invoices,” or “bills.” An invoice is always created in response to the respective PO, even if the order was settled informally.
• Invoices are a crucial tool for keeping everyone on the same page regarding payment.
• Both SOs and invoices contain details about a transactions, as well as delivery and billing information for the purchase taking place.

Essentially, these invoices are generated after the approval of a purchase order. PO invoices contain details about the goods or services procured, and a matching purchase order number.

What are the similarities and differences between purchase orders and sales orders?

The PO is prepared by the buyer when they order goods or services, while an invoice is created by the seller to request payment for the goods sold. POs tell a supplier how much of a product to deliver to the customer and when the customer will pay for the goods they receive. A purchase order is a document that states the types and quantities of products being purchased by your customer. It also includes the prices of each item, how your customer will pay, the delivery date of the order, and other terms and conditions. While the SO is often considered an optional or on-request document, invoices are almost always used to request payment from the buyer during the purchasing process.

If you have customers who make the same purchase every month, don’t waste your time rewriting the same invoice. Set up recurring invoicing with secure storage of credit card information and automatic payment. Then send automated receipts once the invoice has been fulfilled. When Dan’s accountant receives it, he references that number and can see in the system that delivery was made. He authorizes the system to pay John on the next check run in 60 days but then realizes that there’s a special note on the purchase order that Dan has to be paid in 30 days. It acts as an official agreement between buyer and seller, authorized by the management of both companies.

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Some accounting software automatically generates the purchase order number when the new order is prepared. This number can be referenced by the seller and client throughout the process of buying.

On the other hand, an invoice is delivered after the vendor has fulfilled their part of the obligation. Vendors send invoices after providing their products and services. If you fail to understand the difference between purchase orders and invoice documents, you may fail to grasp the finer points of the company’s finances. Should include the purchase order number as well as specifics on the products or services that the customer and provider have agreed on.