The Purchasing Process: Defining Invoice and Purchase Order



Purchase Order display in the monitor of the laptopInvoices and purchase orders are important documents that almost all finance departments work with regularly, if not daily. But what exactly are they? Are they the same? If not, what roles do they play in the accounts payable and order processes?

Defining the purchase order and the invoice

A PO or purchase order is the official document that confirms an order that is sent by the purchaser to the vendor, who will, in turn, authorize the order. Although some detail might differ, a purchase order would typically include the purchaser or company’s name, order date, price, quantity, a description of the services of products to be purchased, payment details, purchase order number, invoice address, and mailing address.

You could create a purchase order manually or through a PO management software to ensure accuracy and easier tracking.

An invoice, on the other hand, is the official document that requests payment for purchased goods or services sent by a vendor to the purchaser. It contains the same information included in the corresponding purchase order and other details such as the invoice number, discounts or credits, vendor contact details, total amount for payment, and the payment schedule.

Legally binding documents

As you can see, these two documents are different from each other. The purchase order is used for confirming an order, while the invoice is used for requesting payment for the items or services ordered by the purchaser. Regardless of their roles in the purchase process, they share one very crucial similarity – they are both legally binding documents, which means that all people or entities indicated in the documents should follow the actions specified in them or they will run into legal issues.