Ordering GuruPurchase order vs invoice: what’s the difference?
A purchase order (PO) is what you, the buyer, send a supplier to say what you want to buy and at what price. An invoice is what the supplier sends you after delivering, to say what you owe. One is a request, the other is a bill. Comparing the two is the simplest way to stop paying for things you did not receive or prices you did not agree to.
Side by side
| Purchase order | Invoice | |
|---|---|---|
| Who creates it | The buyer | The supplier |
| When | Before the goods are delivered | After delivery (or with it) |
| What it says | What you want to buy, how many, at what price, and when | What was delivered and what you owe |
| What it is for | Placing the order and agreeing the price | Getting paid |
| Key number | PO number | Invoice number, often quoting your PO number |
A third document: the delivery receipt
Between the two sits the delivery receipt or packing slip that comes with the order. Check it at the door against your PO: shorts, substitutions and damaged cases are much easier to get credited before you sign than after.
Matching the PO, the delivery and the invoice
Accountants call this a three-way match: before paying, check that the purchase order, what was actually received, and the invoice all agree. For a small business it comes down to three questions:
- Did we get everything we ordered? Compare the delivery with the PO.
- Are we being charged only for what arrived? Compare the invoice quantities with the delivery.
- Are the prices the ones we agreed? Compare the invoice prices with the PO.
Most discrepancies are small: a missing case, a price that went up a few percent, a substitution billed at the original item’s price. Across a year and several suppliers, they add up.
Do you need purchase orders if you are small?
Not legally, and many small businesses order by text or phone. But without a PO you have nothing written to check the invoice against except memory. Even a simple emailed PO with item numbers, quantities and expected prices is enough. Our free purchase order template covers what to include.
Keeping it manageable
The matching only works if creating POs is quick. Ordering Guru builds a purchase order for each supplier from their current price list and emails it from your own address, and its receiving step records what actually arrived, including partial deliveries, so you have the PO and the delivery side by side when the invoice comes in.
Frequently asked questions
What is the difference between a purchase order and an invoice?
A purchase order is created by the buyer before delivery to request goods at an agreed price. An invoice is created by the supplier after delivery to request payment for what was supplied.
Which comes first, the purchase order or the invoice?
The purchase order comes first. The buyer sends it to place the order; the supplier sends the invoice once the goods have been delivered.
Is a purchase order legally binding?
Once a supplier accepts a purchase order it generally forms a contract for the goods at the stated terms, though the details depend on your jurisdiction and any agreement with the supplier.
What is a three-way match?
Checking that the purchase order, the delivery receipt and the supplier’s invoice agree on items, quantities and prices before paying the invoice.