Purchase Order vs. Invoice: What's the Difference?
Edited by Aimie Carlson || By Harlon Moss || Updated on October 19, 2023
A purchase order is a buyer's official request to a seller for goods or services, while an invoice is the seller's bill for those goods or services after they've been delivered or performed.
Key Differences
A purchase order is a document issued by a buyer to a seller, indicating the types, quantities, and agreed prices for products or services. An invoice, on the other hand, is a document issued by the seller to the buyer, listing the goods or services provided and stating the amount due.
The main objective of a purchase order is to provide clear communication and specifics to the seller about what the buyer wants. The invoice serves as a demand for payment, confirming the sale and indicating the amount the buyer owes.
From a transaction flow perspective, the purchase order typically comes before the delivery of goods or services, while the invoice is presented after the delivery. Essentially, a purchase order sets the expectations for the transaction, and the invoice confirms that those expectations were met.
In terms of legal implications, a purchase order is a formal offer to buy and can become a binding contract once accepted by the seller. An invoice, in contrast, is a record of the sale and is used as a basis for payment.
While both documents contain details about items, quantity, and price, a purchase order might also include delivery dates, payment terms, and other conditions. An invoice will typically have payment terms, due dates, and information related to discounts or late fees.
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Comparison Chart
Purpose
To request specific goods or services.
To bill for goods or services provided.
Timing
Issued before receiving goods/services.
Issued after delivering goods/services.
Issued By
Buyer or client.
Seller or service provider.
Binding Nature
Can become a binding contract when accepted.
A record of the sale, basis for payment.
Contains
Delivery details, payment terms, conditions.
Payment terms, due dates, discounts, late fees.
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Purchase Order and Invoice Definitions
Purchase Order
A document from a buyer requesting specific goods or services from a seller.
We sent a purchase order for 100 units of the new model to the manufacturer.
Invoice
A document requesting payment for goods or services provided.
We received an invoice from the contractor for the completed renovation work.
Purchase Order
A buyer's official commitment to buy certain products or services.
After negotiations, the company finalized the purchase order with the supplier.
Invoice
A record of a transaction or sale, detailing the amount due.
The monthly invoice included all the transactions and charges.
Purchase Order
A written authorization for a supplier to deliver specific goods at specified prices.
The purchase order detailed the exact specifications of the machinery.
Invoice
A tool used by businesses to track sales, revenue, and accounts receivable.
Proper invoicing helps businesses manage their cash flow effectively.
Purchase Order
A formal offer from a buyer to a seller to acquire certain goods or services.
The vendor won't ship the items without a confirmed purchase order.
Invoice
A seller's official bill presented to a buyer for payment.
Please check the details on this invoice before processing the payment.
Purchase Order
A tool used by businesses to control and track their purchasing activities.
The finance team uses purchase orders to monitor and manage expenses.
Invoice
A statement listing delivered goods or performed services and indicating the sum owed for these.
The client disputed a charge on the invoice, so we're reviewing it.
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.
FAQs
Is a purchase order legally binding?
A purchase order can become a legally binding contract once accepted by the seller.
When is an invoice typically sent?
An invoice is typically sent after goods have been delivered or services have been performed.
What is a purchase order?
A purchase order is a buyer's official request to a seller for specific goods or services at specified prices.
What's the main purpose of an invoice?
The main purpose of an invoice is to bill the buyer and detail the amount due for goods or services provided.
Who issues the invoice?
The invoice is issued by the seller or service provider to the buyer or client.
Can a purchase order be used as an invoice?
While they contain similar information, a purchase order is not an invoice. They serve different purposes in the transaction process.
What is an invoice?
An invoice is a bill presented by the seller to the buyer for goods or services provided.
Can a purchase order be changed after it's issued?
Changes can often be made, but they typically require agreement from both the buyer and seller.
Is a purchase order needed for every transaction?
Not necessarily. Some businesses might require it for larger transactions, while others may use them routinely.
Why is an invoice important for businesses?
An invoice serves as a record of sale, basis for payment, and helps in tracking revenue and accounts receivable.
When is payment typically due after receiving an invoice?
Payment terms vary but are often stipulated on the invoice, such as "net 30 days."
What happens if there's a discrepancy between a purchase order and an invoice?
Discrepancies should be resolved between the buyer and seller, often involving checks against agreements and delivered goods/services.
Do all businesses use purchase orders?
Not all, but many businesses use purchase orders to control and monitor their purchasing activities.
Can a purchase order be canceled?
Depending on the terms, a purchase order can often be canceled before the goods are shipped or services are provided.
What details are typically on a purchase order?
A purchase order often includes item details, quantity, price, delivery dates, payment terms, and other conditions.
Is an invoice a proof of payment?
No, an invoice is a request for payment. A receipt or payment confirmation is proof of payment.
What happens if an invoice isn't paid on time?
Late invoices may incur fees or interest charges, depending on the terms set by the seller.
How do businesses manage purchase orders and invoices effectively?
Many businesses use software or systems to track, manage, and reconcile purchase orders and invoices to ensure smooth operations and accurate financial records.
What's the link between a purchase order and an invoice?
A purchase order sets transaction expectations, while an invoice confirms those expectations were met and demands payment.
Do purchase orders specify delivery dates?
Many purchase orders include delivery dates to clarify when goods or services are expected.
About Author
Written by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
Edited by
Aimie CarlsonAimie Carlson, holding a master's degree in English literature, is a fervent English language enthusiast. She lends her writing talents to Difference Wiki, a prominent website that specializes in comparisons, offering readers insightful analyses that both captivate and inform.
