Purchase Order vs Invoice: What’s the Difference?

Purchase Order vs Invoice: What’s the Difference?

People often confuse a purchase order with an invoice and use the terms interchangeably.

Although purchase orders and invoices contain similar elements, they are two separate documents that serve different purposes.

Invoices are created by the seller as a request for payment, whereas a purchase order is issued by the buyer to communicate what they want to purchase.

In this guide, we will be going through the details of the main differences and similarities between purchase orders and receipts.

Read along to learn about:

What Is A Purchase Order?

A purchase order (or P.O. for short) is a commercial document issued by the buyer to the seller, at the start of a business transaction. It’s used to communicate the type and quantity of the product a client wants to purchase.

After the purchase order is completely filled out, the client sends it to the seller for approval. Upon approval, the purchase order then becomes a legally binding document.

Elements of a Purchase Order

A P.O typically includes the following elements:

Example of A Purchase Order

What Is An Invoice?

An invoice is a commercial document issued by the seller to the buyer. More specifically, it’s the bill that requests payment and allows businesses to get paid for the products and services they provide.

Proper invoicing assists inventory management, accurate tax filings, and allows you to figure out the most in-demand goods, peak buying times, and other customer purchase patterns.

Elements of An Invoice

To fill out an invoice, you need to the following elements:

Example of An Invoice

Keep in mind that these elements may vary depending on the type of invoice the business is issuing. If you’re shipping products internationally, for example, you’ll need to issue a commercial invoice that contains extra details such as shipping and transport fees.

If you want to learn more about the elements of an invoice and how to create one from scratch, check out our guide on how to make an invoice & get paid faster.

Purchase Order vs Invoice

Differences

The main differences between a purchase order and an invoice include:

If you want to learn how to keep track of your business’ accounts and properly create financial statements, our guide on the accounting cycle has everything you need to know.

Similarities

Purchase orders and invoices are often confused because of the following similarities:

Invoice vs Receipt Comparison Chart

Here’s a quick recap of both documents and their main characteristics:

Frequently Asked Questions

#1. What’s the Difference Between a PO Number and an Invoice Number?

A PO number is a unique number that identifies a purchase order. Whereas the invoice number is the identifier assigned to each invoice.

The PO number will be referenced throughout the entire transaction process by both buyer and seller. That’s why the ending invoice often includes both the invoice ID and the original PO number.

It’s important these codes are uniquely generated through a numbering system, to avoid duplications and other accounting errors from taking place.

These codes can be created manually or automatically through accounting software.

#2. What’s the Difference Between an Invoice and a Receipt?

An invoice is issued first before payment gets made, as a request for payment. A receipt, on the other hand, is created after cash gets paid as proof of payment.

Both documents are issued by the seller.

If you want to learn more about the differences between invoices and receipts, head over to our invoice vs receipt guide.

Automate Invoicing with Online Software

Manually creating invoices in Word and printing paper is a costly, time-consuming, and old fashioned way of dealing with accounting.

That’s why most businesses nowadays are switching to automation and cloud accounting software, instead.

We at Deskera, offer an intuitive online software that allows you to create invoices, process purchase orders, and make invoice payments digitally within seconds!

In the Deskera document generator, you can find over 100 professional invoice templates, that are easily customizable to your business brand.

Just add in your logo, signature, preferred colors, fill in the appropriate details, and you’re done!

Deskera Document Generator - Purchase Order vs Invoice

At the same time, any recurring or repetitive invoices, purchase orders, payments, billing can be automated with a click of a button!

Recurring Invoices with Deskera - Purchase Order vs Invoice

Want to avoid past due invoices and cash flow worries?

Deskera lets you request advance payments and set up automated reminders every time an invoice is close to its due date.

Request Advance Payments with Deskera - Purchase Order vs Invoice

The best part? The software is accessible from anywhere with an internet connection just by downloading the Deskera mobile app.

Give the software a try out yourself, with our completely free trial.

Key Takeaways

And that’s a wrap!

Before leaving, let’s go through the main differences between an invoice and a purchase order one more time:

Related Articles

Deskera featured posts

ERP for eCommerce - A Complete Guide

ERP for eCommerce - A Complete Guide

ERP for Beverage Manufacturers: A Complete Guide

ERP for Beverage Manufacturers: A Complete Guide

All You Need to Know About Batch Tracking of Inventory

All You Need to Know About Batch Tracking of Inventory

ERP For Apparel Industry: A Complete Guide

ERP For Apparel Industry: A Complete Guide

ERP for Heavy Equipment Industry- A Complete Guide

ERP for Heavy Equipment Industry- A Complete Guide
Latest posts in Deskera

Generative AI: The Next Frontier in Inventory Optimization

Generative AI: The Next Frontier in Inventory Optimization

Sustainable Inventory Management Practices for Manufacturing Executives

Sustainable Inventory Management Practices for Manufacturing Executives

The Role of Vendor Managed Inventory (VMI) in Modern Manufacturing Operations

The Role of Vendor Managed Inventory (VMI) in Modern Manufacturing Operations

ERP Software for Inventory Management: A Comprehensive Guide

ERP Software for Inventory Management: A Comprehensive Guide

Contract Manufacturing is Crucial for your Business. Learn Why!

Contract Manufacturing is Crucial for your Business. Learn Why!
Recommended for you

VAT Invoice: Definition & Rules for VAT Invoicing

VAT Invoice: Definition & Rules for VAT Invoicing

While businesses located in the US are imposed a retail sales tax, many other countries across the world are subject…

10 min read Feb 28, 2021

Difference Between an Invoice vs a Receipt [with Examples]

Difference Between an Invoice vs a Receipt [with Examples]

While both an invoice [http://deskera.com/blog/what-is-an-invoice/] and a receipt are commercial documents, invoices are issued to request…

8 min read Jan 31, 2021

How to Fill Out an Invoice: Step-by-Step Guide for Businesses

How to Fill Out an Invoice: Step-by-Step Guide for Businesses

Once you’ve done your work and clients are happy with their purchases, it’s finally time to get paid!…

9 min read Jan 30, 2021

Hey 👋! Discover the best! Now!

Everything to Run Your Business

Get Accounting, CRM & Payroll in one integrated package with Deskera All-in-One.

Hey 👋! Discover the best! Now!

Everything to Run Your Business

Get Accounting, CRM & Payroll in one integrated package with Deskera All-in-One.