Purchase Order V.S. Invoice
Starting a new business is not easy, and it is the same thing with maintaining one. It becomes even more troubling when you consider the different paper works. Although many of them are easily distinguishable from one another, others are confusing and require care to not mistake one for another. Purchase orders and invoices fall in this category. Both of these financial documents deal with requesting payments and goods. They contain a list of goods but they are usually moving in opposite directions between a buyer and a seller. Below are the complete differences and similarities between both.
Below, we’ll cover:
- What Is a Purchase Order and an Invoice?
- What Do Purchase Orders and Invoices Include?
- What Are Purchase Orders and Invoices Used for?
- What are the similarities and differences between invoices and purchase orders?
What Is a Purchase Order and an Invoice?
Before we go ahead to list the many differences and similarities between both, knowing what both are is a good way to begin. And that should provide just enough basis to compare them.
A purchase order is a business document which a buyer sends to a seller in request for goods and services from the seller. Purchase orders (PO) contain the products, types and quantities that a customer wants to buy. They also contain relevant information such as the price, the date the goods and services are needed, and any other relevant information.
A purchase order primarily starts a business dealing and is an official statement with which a customer states his intention to patronize a business. It details the entire expectations from the seller. It is extremely important so that the wrong products are not delivered.
On the other hand, invoices are sent the other way around from the seller to the buyer in request for payment for goods supplied or services rendered. Invoices are created by business owners after the completion of a business project. It lists the products sold, including the description, quantity and price.
An invoice is used together with a purchase order; hence, it would also contain the reference number of the purchase order. Since the purchase order and invoice contain essentially the same thing, they are similar even when the purposes are different.
What Do Purchase Orders and Invoices Include?
Purchase orders and invoices are very similar in terms of their contents. They contain almost the same information with only slight differences. Below is a list of the components that you would find in both documents.
- Dates: Dates are crucial components of any official document. Therefore, it is only natural that both documents would feature the date, the date of order for the purchase order and the date of supply for the invoice.
- Invoice number and purchase order number: These numbers must be contained on both documents for referencing, record keeping and tracking. While the purchase order would have the PO number, the invoice would contain both. The reference numbers would also be mentioned in letters and correspondences.
- Product description: Each of these documents would be complete without the full product descriptions, quantity and price. It tells the seller what the buyer wants and the buyer what the seller has supplied. The invoice would also contain the tax and discount information where they are applicable.
- Name and address: A purchase order has to include the requesting name and address as well as that of the seller. The invoice would also contain the same thing.
- Terms and conditions: Certain terms and conditions would be included in both documents depending on what the situation dictates.
- Signatures: This is what renders a document binding and it has to be included to make the documents completely legal.
What Are Purchase Orders and Invoices Used for?
Despite the fact that these two documents go in opposite directions, they are both useful for both the seller and the buyer. For example, a purchase order comes from the intending buyer to a supplier; yet, it can help the supplying company keep track of what they have supplied and help them know which products are in demand at particular periods.
Purchase orders are used for requesting products from a supplier. They state the quantities needed and clarify how payments would be made. A purchase order can also come in handy in tracking orders as well as in clarifying legal matters.
Invoices mainly help the seller request for payment from their clients and customers. However, it can also help the customers know what goods they have received, the amount they are supposed to pay, and assist both parties in essential daily record keeping.
What are the similarities and differences between invoices and purchase orders?
Just in case the similarities and differences are not completely apparent yet, the following list would do justice to the clarification.
- A purchase order is sent by the customer to the seller, while the invoice goes in the opposite direction from the selling company to the client or buyer.
- A purchase order states the intention of the buyer to buy specific goods. The invoice lists only the goods and services that are already sold or rendered to the client.
- A purchase order includes the details of requested products and services, but the invoice details the billing for the transaction.
- Both documents are used for business transactions involving either a sale of product or rendering service.
- They can both be used for tracking orders, transactions and accounts. They are also important in record keeping.
- Both the purchase order and the invoice makes the details contained binding on either party after they have been signed.
- They both contain the product description, buyer and seller information, dates and signatures.
The entire process of creating, sending out, and managing invoices and purchase order can consume a lot of time and energy; yet your business cannot do without them. Therefore, you should consider taking advantage of our invoice templates and generators to make things easy for your business.
WeInvoice has a large reservoir of invoice templates that you can use for free. Our templates are prepared to meet all of the requirements of modern day businesses. You only have to download on our website and you’re all set. We also have amazing invoice generators if that is what you’d prefer.