Business

Difference between Purchase Order and Invoice




  • Main Difference

    The main difference between the purchase order and invoice is that purchase order a first official commercial instrument issued by a buyer to seller showing product description/items, quantities or units and agreed prices for products and services. On the other hand, the invoice is an official commercial instrument issued by a seller to buyer as an evidence of the amount due after order received by the buyer or goods sold by the seller.

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    Comparison Chart

    Basis of Distinction Purchase Order Invoice
    Definition It is a commercial document issued by buyer to seller demanding specific goods or services It is a commercial document issued by seller to buyer as a proof of goods and products forward and amount due
    Sequence Purchase order comes first before the invoice Invoice is sent after order has been forwarded to buyer
    Legal Obligation Purchase order is offer to contract Invoice is acceptance of contract
    Sent By Buyer Seller
    Sent to Seller Buyer
    Areas Covered Contains goods, products or services needed by the buyer Contains price of goods, products or services being sold by the seller
    Order Number Contains purchase order number only Contains both purchase and invoice number
    Discounts Buyer cannot insert discounts by himself Mentioned by seller if he approved it
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    Purchase Order

    purchase-orderA purchase order is a commercial instrument issued by the buyer to the seller for buying the products, goods or services. In simple terms, purchase order carries with it the needs of the buyer. The purchase order issued by the buyers contains the company name, logo, address, details of the goods and services, description, quantity, unit price and total. Moreover, it also includes the purchase order date, requisitioner, shipping details and payment terms and conditions. POs are used when a buyer wants to acquire services or purchase supplies. It has great importance in the business world because a properly administered purchase order makes the businesses able to get the quick detail of what has been ordered, shipped and received but not invoiced so on. At seller part, it is used to fulfill the orders and payment processing. The details carried by purchase order are the date of issue, purchase order number, descriptions of goods, name and address of the buyer, name and address of the seller, terms and conditions and signature of authorized authority. Overall POs make the buyers able to explicitly and clearly communicate their requirements to the sellers.

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    Invoice

    invoiceInvoice or simple bill is a commercial instrument issued by the seller to a buyer as a proof of sale transaction and indicating the products or items description, quantities sold, unit price, total prices of goods and service the seller had provided the buyer. It has clearly mentioned on its face it is an invoice and has a unique invoice number that is useful for both internal and external references. The details carried by invoice are the date of issue, invoice number, purchase order number, the number of items sold, prices agreed, discount or rebate (if any), taxes (if any), total amount payable, name and addresses of both buyer and seller and signature of the seller or his authorized agent. From a seller perspective, it is a sales invoice, and from buyer point of view, an invoice is a purchase invoice. In a nutshell, invoice indicates money is owed and owing.

    Key Differences

    • The purchase order is a first step in the business transaction while invoice is the second step in a business transaction.
    • The purchase order is a commercial invoice issued by a buyer to the seller while invoice is issued by a seller to the buyer as a memorandum of the amount due against products or services acquired by the buyer.
    • PO is generated before the issuance of an invoice while invoice is generated and issued after a purchase order.
    • The legal value of purchase order is a contract of sale of the offer of the contract while invoice makes the confirmation of sale or acceptance of the contract.
    • Both purchase order and invoice contain same However, the additional details containing by an invoice are a technical detail for records, the shipping details, invoice number, purchase order number, and total amount due.
    • Purchase order mainly consists of the quantity of goods or products and the due date of the delivery of products, goods or services while an invoice has the price of goods being sold along with due date and terms and conditions.
    • The purchase order is prepared by the buyer in lieu of placing an order while the invoice is what the seller issue in lieu of the payment to be received.
    • The invoice contains the tax, freight and handling charges and also finance charged in case of late payments while purchase order has no concern with all these areas.
    • A purchase order can be consists of only one document covering all part shipments whereas in most of the cases invoice is prepared for each shipment.

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