The main difference is in the purpose of each official document: one is to ensure an accurate order for the customer, the other is to guarantee the vendor payment for the order. There are several key distinctions between POs and invoices, some of which have already been detailed above. Purchase Order vs Invoice: How are They Different? Purchase orders and invoices feed information into one another. Or they might include additional chargers from late or missed payment requests. By waiting until the order is finished, an accountant finalizing the invoice can check the updated PO for accuracy, see the change order, and adjust the total costs accordingly.Īdditional invoices might be sent out by the finance team on a set timetable to serve as payment reminders as due dates approach. However, if a customer requests a late change order, the change in price might not be included on that initial invoice. For instance, if the accounting department uses billing and invoicing software, they might automatically generate invoices before purchase orders are fulfilled. One reason invoices are usually made after POs is so they can include the latest information listed in the purchase order. Regardless of when the financial documents are generated, the PO number will link the two documents to help identify potential inaccuracies. Generally, an invoice is made after a sale has been made, although some businesses create invoices alongside purchase orders in order to speed up the payment process. Finally, the invoice may specify if payment can be made electronically with credit cards, or through other means. Most of these details will be worked out when the purchase order is made, though sometimes the exact payment schedule will depend on other factors set by the buyer or seller. Depending on the order, payment might be expected as a single lump sum by a certain due date, or there may be recurring payments over a set period of time until the full amount is paid off. An invoice number, usually generated automatically based on the date created, allows the accounting department to review outstanding invoices.Īdditionally, the invoice process is designed to inform the buyer of when payment is due and how it is to be paid. For example, a company might differentiate between the cost of materials and labor in an itemized bill. This may include details about how the order was fulfilled in order to explain the finalized costs. In its most basic form, it is an official way to request payment for a business transaction. The PO follows the order as it passes from the sales team to everyone involved in fulfillment, from warehouse staff in charge of inventory management to delivery drivers who will get the goods to the customer.Īn initial purchase order can also be used to set the terms for recurring orders without the need for creating new documentation each and every time.Ī sales invoice is a document showing payment terms, such as how much a customer or client owes a company for purchased goods and services. Their accounting department is responsible for designing the initial document. When Do You Use a Purchase Order?Ī purchase order is made once a customer or client has started the sales process with your company, whether it’s for a good or service. It will detail features like quantity of goods, anticipated delivery date, customization options, labor necessary, and occasionally the total amount due. Whether the purchase order is made manually or with software, this binding document officially begins the procurement process and the relationship between buyer and seller. Each order will be labeled with a purchase order number for both sides to reference in future interactions. Some even rely on purchase order software to automatically generate identical POs once an order has been started. Technically, the PO is made by the buyer, as it indicates what it is they are purchasing, although most companies have their own set forms to ensure consistency once a PO is received.įor example, it’s common for companies to digitize POs to preserve the original document and have easily accessible electronic versions which can be instantly shared with various departments. A purchase order or PO is an internal company document which details what a customer or client is purchasing, such as quantity or product type.
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