Invoice vs purchase order: What’s the difference?
The first step in a transaction often starts with one of two things — an invoice or a purchase order. But from your side of things, how can you be sure which to send? Let’s dive into the key differences between the two to give you a better idea of what each of these contracts does, how they work, and which is right for your circumstances.
Invoice vs purchase order definition.
A purchase order is a contractual agreement that sets up the groundwork between the buyer and the seller for the purchase of goods or services. It outlines the specifics of the transaction and includes item details, quantities, agreed-upon prices, delivery schedules, and terms of payment.
An invoice, on the other hand, is a commercial document issued by a seller to a buyer that requests payment for provided goods or services. It serves as a record of the transaction and details the products or services, their respective prices, any applicable taxes or discounts, and the total amount due. Unlike a purchase order, which initiates the purchase process, an invoice concludes the transaction.
The difference between invoice and purchase order.
While both invoices and purchase orders play important roles in the buying and selling process, they serve different purposes and contain different types of information. Here are the key differences between an invoice and a purchase order:
- Timing. A purchase order is issued before goods or services are delivered and outlines the terms of the purchase. An invoice is issued after delivery, requesting payment.
- Purpose. A purchase order specifies transaction details and establishes a contract between buyer and seller. An invoice requests payment for goods or services provided.
- Content. Purchase orders include items, quantities, prices, delivery dates, and payment terms. Invoices list the provided goods or services, prices, any taxes or discounts, and the total amount due.
- Legality. When a purchase order is accepted, a legally binding agreement is created. Invoices serve as payment requests but aren’t legally binding contracts.
- Communication direction. Purchase orders are sent from buyer to seller and initiate a transaction. Invoices are sent from seller to buyer, and payment is requested at the end.
When you should use an invoice vs. a purchase order.
If you’re hoping to receive payment for goods or services you provided — in other words, if you’re the vendor — you’d write an invoice and send it to the buyer. This task typically happens after you’ve completed the work or delivered the products. For example, if you’ve finished a graphic design project for a client, you’d send them an invoice to request payment for your services.
If you’re trying to confirm an order of goods and services you’ve requested, odds are you’re the buyer, and you’re trying to confirm your order with your vendor. In this case, you’d send a purchase order to your supplier to specify the items you need, the quantity, and any other relevant details. For instance, if your company needs to buy new office supplies, you’d send a purchase order to the supplier outlining the items required and the delivery instructions.
Why companies need both purchase orders and invoices.
Being able to create both is important as purchase orders start purchases, making sure goods are acquired as needed, while invoices finish sales, helping with payment and revenue generation. Efficiently managing both documents helps companies maintain clear financial records and strong relationships with suppliers and customers.
Simplify your invoicing process.
Let Adobe Acrobat and our business tools help you and your business handle invoices and purchase orders. The process of signing contracts, verifying your signature, and authenticating documents doesn’t need to be a struggle when you have the right e-signature software.