Difference Between A Purchase Order And An Invoice


Purchase order and invoice are two mostly confusing financial terms and they can often seem like synonyms. But their time of occurrence is different. For the new business specializing in the sale of merchandise; a purchase order and an invoice may come into the picture. While the invoice is the most widely recognized of the two, it does not make it more important. Nevertheless, a purchase order has its professional place of providing a detailed description of products including clarification of what is required from a supplier. By looking at the difference between a purchase order and an invoice can assist your business in making the best professional decisions.

What the Purchase Order Can Offer

The purchase order is a legally binding document. The purchase order is created by the buyer and offered to a seller.

A Purchase Order generally includes:

  • Date of order
  • PO number
  • Details of products ordered
  • Name and address of the buyer
  • Name and address of the seller
  • Terms and conditions
  • Signature of issuing authority

These requests must be detailed. So as to avoid any confusion between the purchaser and the supplier. POs are used to tell a supplier that how much of a product to deliver to the customer and when the customer will pay for the goods they receive.

The Purchase orders are duplicated. With one provided for the supplier and the copy delivered to the internal sales department. The purchase order is necessary to document the transaction between the purchaser and the vendor or supplier. A large number of businesses do not invest in purchase orders. Because of the amount of paperwork.

The purchase order is crucial for small businesses. This ensures that the relevant details are recorded and should any conflict occur, the purchase order will serve as proof of the relevant information.

When the information concerning sales and purchases is not properly recorded, it can cause significant problems and delays in the placement of an order and the receipt of items.

Details About the Invoice

The invoice is the document that is sent from the seller or the business to the buyer or client. Invoices are a great way to track your earnings, business, and expenses. This includes a complete breakdown of the sales from the purchase of the goods. An invoice may be sent after the purchase goods are received by the client or customer. It serves as an agreement. The invoice can be paid before or after the invoice date is issued. Invoices are also commonly called as

a) bills, b) statements, or c) sales invoices.

Invoices are important and will have to be issued as part of the sale. Businesses vested in the sale of products and services will be required to issue an invoice. The Invoicing software offers the efficiency and flexibility to record the transactions including the information that is legally binding in the purchase and the payment of merchandise.

The Invoices and purchase orders are legal documents. That remains an important part of regular business transactions. The transactions between the business and a supplier should be governed by the purchase order. When the sale of merchandise is initiated between the business and the customers. An invoice is issued before and after the products are delivered. Invoices include the date, VAT, subtotal, total, and the description of goods. The customers can make payment before the goods are delivered or it can be settled after the products are delivered.

As a result businesses must determine the importance of these documents and ensure all the details are accurately recorded. So as to make the best of daily transactions and sales.

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