Purchase Order vs. Invoice — What's the Difference?
By Urooj Arif & Maham Liaqat — Published on December 19, 2024
A Purchase Order is a document issued by a buyer to a seller, detailing the products or services ordered and their prices. An Invoice is a request for payment issued by the seller to the buyer, detailing the goods or services provided and the amount due.
Difference Between Purchase Order and Invoice
Table of Contents
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Key Differences
A Purchase Order (PO) is the initial document issued by a buyer to a seller, signifying intent to purchase goods or services under specified terms. It outlines the types, quantities, and prices of products or services. An Invoice, on the other hand, is issued by the seller after the delivery of goods or services. It serves as a request for payment, detailing the items delivered, their prices, and the total amount owed.
Purchase Orders are preventive measures, allowing buyers to control their spending and ensuring that orders are clearly communicated. They serve as a legal agreement once accepted by the seller. Invoices are reactive, summarizing the transaction completed and signaling the buyer to make payment. They play a crucial role in the accounting processes for both parties.
The PO includes information such as the order date, description of goods or services, quantity, and the agreed-upon prices. This document helps in managing inventory and budgeting. Invoices contain similar details but focus on what has been delivered, including the invoice date, payment terms, and due date, crucial for financial records and tax purposes.
POs are often used as a reference in the invoicing process, ensuring that the invoiced amounts match the agreed terms in the PO. This comparison helps in avoiding disputes and simplifying the reconciliation process. Invoices, by confirming the completion of a transaction, trigger the payment process and are essential for cash flow management.
POs are optional and primarily used in business-to-business (B2B) transactions for larger orders or ongoing services, while invoices are mandatory for both B2B and business-to-consumer (B2C) transactions, serving as proof of sale and purchase agreements.
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Comparison Chart
Purpose
To order goods or services before delivery.
To request payment after delivery.
Issued By
Buyer
Seller
When Issued
Before the delivery of goods/services.
After the delivery of goods/services.
Main Focus
Details ordered items and agreed prices.
Details delivered items and amount due.
Legal Significance
Serves as a legal offer to purchase.
Serves as a legal request for payment.
Compare with Definitions
Purchase Order
Specifies the types, quantities, and agreed prices for products or services.
The purchase order included detailed specifications for the custom software.
Invoice
A document requesting payment for goods or services delivered.
The contractor sent an invoice for the completed renovation work.
Purchase Order
Acts as a legal document once accepted by the seller.
The supplier accepted the purchase order, making it a binding contract.
Invoice
Details the quantities, prices, and total amount due.
The invoice listed all the electrical parts used and their prices.
Purchase Order
Can be referenced in invoices for accuracy.
The invoice matched the details listed in the purchase order, ensuring correct billing.
Invoice
Issued by the seller to the buyer after delivery.
Upon delivering the furniture, the store issued an invoice.
Purchase Order
Used to control spending and manage inventory.
Using purchase orders helps the firm track its monthly expenditures on office supplies.
Invoice
Essential for accounting and tax purposes.
The business filed all received invoices for the fiscal year for tax reporting.
Purchase Order
A formal document from a buyer to a seller ordering goods or services.
The company issued a purchase order for 100 laptops.
Invoice
Includes payment terms and due date.
The invoice stated a 30-day payment term from the date of issue.
Invoice
A detailed list of goods shipped or services rendered, with an account of all costs; an itemized bill.
Invoice
The goods or services itemized in an invoice.
Invoice
A bill; a commercial document issued by a seller to a buyer indicating the products, quantities and agreed prices for products or services that the seller has already provided the buyer with. An invoice indicates that, unless paid in advance, payment is due by the buyer to the seller, according to the agreed terms.
Invoice
A written account of the particulars of merchandise shipped or sent to a purchaser, consignee, factor, etc., with the value or prices and charges annexed.
Invoice
To make a written list or account of, as goods to be sent to a consignee; to insert in a priced list; to write or enter in an invoice.
Goods, wares, and merchandise imported from Norway, and invoiced in the current dollar of Norway.
Invoice
An itemized statement of money owed for goods shipped or services rendered;
He paid his bill and left
Send me an account of what I owe
Common Curiosities
Who issues an Invoice?
The seller issues an Invoice to the buyer.
What is a Purchase Order?
A document issued by a buyer detailing the items they want to buy, their quantities, and the prices.
What is the difference between a Purchase Order and an Invoice?
A PO is a commitment to buy, issued before delivery, while an invoice is a request for payment after delivery.
What is an Invoice?
A request for payment issued by the seller detailing the delivered goods or services and the total amount due.
Do all transactions require a Purchase Order?
No, POs are typically used in B2B transactions and are not mandatory for every purchase.
How does a Purchase Order control spending?
It allows buyers to approve expenditures before they occur, helping in budget management.
Why is an Invoice important?
It is crucial for accounting, tax purposes, and signifies the obligation to pay.
Can a Purchase Order be canceled?
Yes, a PO can be canceled before the seller has fulfilled the order, subject to the terms of the agreement.
Is an Invoice legally binding?
Yes, an invoice is a legal document that signifies a completed transaction and the buyer's obligation to pay.
Who issues a Purchase Order?
The buyer issues a Purchase Order to the seller.
What details are included in a Purchase Order?
A PO includes the order date, items ordered, quantities, and agreed prices.
What details are included in an Invoice?
An invoice includes the invoice date, items delivered, quantities, prices, and the total amount due.
Is a Purchase Order necessary for small purchases?
Not always; it depends on the buyer's and seller's agreement and the nature of the transaction.
Why is a Purchase Order important?
It serves as a legal agreement and helps in budgeting and managing inventory.
Can an Invoice be issued without a Purchase Order?
Yes, invoices can be issued without a PO, especially in direct sales or B2C transactions.
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Written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
Co-written by
Maham Liaqat
