All businesses broadly involve two parties, the buyer and the seller. A buyer, as it is self explanatory, is the one who is looking for goods, products or services which are available in exchange for money. While the seller is the one who is offering these goods, products or services.

In order to understand what is the basic difference between a purchase order and an invoice lets take an example. Suppose Diva Textiles is the seller who sells all sorts of clothes in bulk. Enter Tom. Tom is a buyer and wants to buy clothes in a large volume. Now Tom will have to make a purchase order and in return, Diva textiles will give him an invoice of the amount in order to get paid.

Purchase orders and invoices are the processes which help to keep a track of inventory and sales involved in a business. Be it selling on a small scale or a large scale, keeping a record of following is really important.

  • Who is buying?
  • Who is to be charged for the sale?
  • What are they buying?
  • How much is it?
  • When is it due for delivery?

There are 3 basic difference between a Purchase Order and an Invoice:

  1. The purchase order is what the buyer prepares, while the invoice is what the seller makes in lieu of the payment receivable.
  2. The purchase order lists the quantity and the due date of delivery of goods, products or services purchased/ordered by the buyer, while an invoice has on it the price of the goods, products or services being sold.
  3. Both, purchase order and invoice have the same details except the technical mention for records viz.a.viz the shipping details, invoice number and purchase orders number which is additional on the invoice.

So in this case, the purchase order is what Tom will send while the invoice is what Diva Textiles will provide Tom in accordance with his purchase. So without the purchase order, no invoices can be generated as it explains and mentions the details of the goods, products or service. These are in terms of quantity, price, due date and most importantly payment terms.

While on the other hand Tom also needs to know how much the purchase costs him. Because it is a bulk purchase, the Invoice would help him cross check whether he has received what he has ordered.

In a gist, the purchase order is the communication from the buyer that is, Tom in this case, to the seller that is Diva Textiles. While the invoice is the response from Diva Textiles (seller) to Tom (buyer).

22 comments so far

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  1. Reply to Jason:
    In this case, both the buyer and the seller needs to come to a common understanding. What you have received so far is call an RFI or request for information from the buyer. At this point since you are interested in this deal, you can send them an budgetary quote and your terms and conditions as well. For example, you can say, you need 50% down payment with the release of the PO. That money will cover your printing cost. Then once you deliver the hard copies, they will make the rest of the payment. There are several varieties of way you can set your terms. But at the end of the day, both party needs to be agreeded upon.

    Reply to sriharsha:
    when we do a work in my company, we generate a work order. That work order is mainly referred internally by us and also a vendor will refer this and charge his time on a time sheet to this work order. Purchase order can be generated separately and attached to the work order for any material procurement or services even. Invoice is normally don’t get attached to the work order. Nothing wrong in having a copy though. We use mainly SAP.

  2. hey can anyone or you help me please?
    I am involved with a company who want to buy some self published books of mine from me. They say they have generated a PO though they have not sent me the copy but stated i need to send an invoice… anyway this is not a problem, the problem is that the order amount they want is very good, but maybe too good! Because for me to supply the books to them i have to get them printed obviously by the printers, who i pay up front for this service. As i understand it the company will only pay me once they receive their order? But i cannot supply this order until they pay me!!! a kind of chicken and egg situation. Or is there an alternative? Can they pay me first like you would if u bought something online from a supplier as a customer? Really hope someone can help, I do not want to ask the company in case i look amateur.
    Jason

  3. Nicely explained, can u tell me in brief about the work order??
    The relation between Work-order,purchase-order, invoice and a time sheet.. How they r related to each other??

    Hope to hear from you shortly.. Thank u

  4. This is well explained, and have understand it.

  5. i get something thx

  6. Please check Invoicera.com

  7. Can you please suggest a free software for online billing and easy purchase order creation?

  8. Thank you

  9. Thank you so much…no i fully understand both and their function.

  10. Nice Explanation ! Thank you

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  12. well explained!

  13. thanks

  14. Thanks for the explanation

  15. Nicely explained documments,

  16. nicely explained…thanks a lot…

  17. Most useful information, Thanks for explaining for us.

  18. thanks a lot

  19. nice explanation

  20. I agree. Nicely explained.

  21. quality and lucid..answered what I was looking for

  22. nicely explained….thanks..