What is the difference between a purchase order and an invoice?
By Tim White · Glossary · Last updated
A purchase order (PO) is sent by the buyer to commit to buying goods or services at an agreed price, before anything is delivered. An invoice is sent by the seller after delivery to ask for payment. The PO records what was agreed. The invoice records what is owed.
Order of events
The buyer issues a PO with quantities, prices and a PO number. The seller delivers and sends an invoice that quotes the PO number. The buyer checks the invoice against the PO, and against the receiving record if they do 3-way matching, then pays.
Why the PO number matters
The PO number on the invoice is how you tie a bill back to an approved purchase. When it's missing, someone has to work out which order the invoice belongs to, and that usually means an email to the vendor and a day's delay. If you use POs, ask vendors to print the number on every invoice and send back any that don't have it.
Quote, sales order, PO, invoice
These four get mixed up. A quote is the seller's price estimate and binds nobody. The PO is the buyer's commitment to that price. A sales order is the seller's internal confirmation that they'll fill it. Only the invoice asks for money.
Common questions
Does a purchase order guarantee payment?
No. A PO authorizes the purchase. Payment follows once the invoice arrives, matches the PO and is approved.
Can you invoice without a purchase order?
Yes. Plenty of small purchases and services are billed with no PO. Some buyers require one above a set amount and send non-PO invoices for extra approval.
Sources
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