Purchase Orders vs. Invoices: What’s the Difference?
The purchase order is an official document issued by the buyer, while an invoice is issued by the seller to request payment.
In the world of business, two of the most commonly used documents are purchase orders and invoices. However, many people don’t understand the difference between the two. It’s important to understand the difference between a purchase order and an invoice, as they are both vital documents used in a company’s accounting and finances.
What is a Purchase Order?
A purchase order is a document sent from a buyer to a seller. It is a commercial document that a buyer sends to the seller to request goods or services. It includes the details and quantity of goods or services the buyer wants, along with an estimated price. The purchase order serves as an agreement between the buyer and seller and outlines the terms and conditions of the sale.
Benefits of Using Purchase Orders
- They help streamline the purchasing process and eliminate errors.
- They provide a clear and concise record of the goods or services purchased.
- They help protect both the buyer and the seller from any misunderstandings.
- They provide an accurate and detailed account of the goods or services purchased.
- They help control inventory levels and keep track of the goods or services purchased.
What is an Invoice?
An invoice is a document that is sent from the seller to the buyer. It is a commercial document that lists the goods or services provided by the seller, along with the associated costs. The invoice also outlines the terms and conditions of the sale, including payment methods and deadlines.
Benefits of Using Invoices
- They provide an accurate and detailed account of the goods or services provided.
- They help to ensure that the seller receives payment for the goods or services provided.
- They can be used to ensure that taxes are paid on the goods or services provided.
- They provide buyers with a clear and concise record of the goods or services they purchased.
- They help protect the seller from any misunderstandings or disputes.
Key Differences Between Purchase Orders and Invoices
The key differences between a purchase order and an invoice are outlined in the table below.
| Purchase Orders | Invoices |
|---|---|
| Sent from buyer to seller | Sent from seller to buyer |
| Request goods/services | Outlines goods/services provided |
| Includes estimated price | Includes actual price |
| Outlines terms and conditions of sale | Outlines payment methods/deadlines |
| Tracks inventory levels | Tracks payment for goods/services |
Conclusion
Understanding the difference between a purchase order and an invoice is essential for any business. A purchase order is a document sent from a buyer to a seller that outlines the goods or services requested, along with the associated terms and conditions of the sale. An invoice is a document sent from the seller to the buyer that outlines the goods or services provided, along with the associated costs and payment methods. Both documents are essential for any business, as they help to ensure that the seller receives payment for the goods or services provided, and the buyer receives what they requested.