Difference between Purchase Order and Invoice

Key Difference: A purchase order is issued by the buyer to the seller indicating the type of products purchased, quantity of the product, the price and the total amount the buyer is willing to pay the seller. A purchase order constitutes as a legal binding document that a buyer send to the seller. An invoice is bill that is issued by the seller to the buyer, stating the products, quantities, agreed prices of the product or service that is being provided to the buyer. An invoice states the sale transactions only. Payment terms are also mentioned on the invoice stating how and when the buyer is expected to pay, or if the buyer has already paid money in advance.

Purchase orders and Invoices are part of a business’ daily activities. Every business includes a buyer and a seller, one who is willing to purchase the goods and services, the other willing to provide goods and services for a price. Purchase orders and invoices are used in order to keep track of inventories, sales and profits. Both are different document types, one which is used by the buyer and the other by the seller.

A purchase order is issued by the buyer to the seller indicating the type of products purchased, quantity of the product, the price and the total amount the buyer is willing to pay the seller. A purchase order constitutes as a legal binding document that a buyer send to the seller. These are most commonly used to control the purchasing of products and services from external suppliers.

A purchase order is an important part of business as it indicates the clear intentions of a buyer, helps protect sellers again non-payments, manage incoming orders, inventory levels and shipping orders. A purchase order has the buyer’s name, company name, the company’s address, contact number, the shipping address, total amount of products being purchased, etc. Purchase orders can also be used to acquire financial assistance, such as before shipment credit facility, post shipment credit facility, trade finance facility, foreign bill purchase credit facility and bill retirement credit facility, from institutions. Today purchase orders are transferred electronically, compared to traditional paper-based.

An invoice is bill that is issued by the seller to the buyer, stating the products, quantities, agreed prices of the product or service that is being provided to the buyer. An invoice states the sale transactions only. Payment terms are also mentioned on the invoice stating how and when the buyer is expected to pay, or if the buyer has already paid money in advance. A due date is also mentioned indicating the number of days the buyer has to pay the money. Sometimes, sellers also offer a discount if the buyer pays the amount before the due date is up.

An invoice contains: the word invoice, a unique reference number, date of the invoice, relevant tax payments, name and contact details of the seller, name and contact details of the buyer, date that the product was sent or delivered, purchase order number, description of the product/service(s), price of the product/service(s) total amount charged and payment terms. An invoice is usually sent after the products/services are shipped or performed. Original paper based invoices have been replaced by electronic ones.

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