Difference Between Purchase Order and Invoice – Find Out Now

What Is a Purchase Order?

Before we move ahead, in purchase order vs invoice, let’s understand the meaning of PO. A purchase order (PO) is an official & legally binding document outlining the goods and services the buyer wishes to acquire from the vendor at a predetermined price and in a specified quantity. These are sent from the customer to the supplier to be confirmed. Once the purchase order is accepted, it becomes a binding contract. A PO may be used by both parties to keep tabs on and organize their respective purchasing process and activities. It smoothens the procurement process.

A Typical Purchase Order covers the following information –

• Purchase Order number
• Date of issuing Purchase Order
• Contact information of vendor/seller
• Brief description of goods or services with quantity
• Price
• Terms and conditions
• Other notes or information

It is easy to generate PO through a ruptured PO generator like Moon Invoice that commits accuracy and professionalism. Additionally, it is also easy to share PO with the vendor through WhatsApp or email. Once the purchase order is received, the vendor may generate invoices automatically based on the Purchase Order data in their system of the procurement process.

Best Tips for Efficient Purchase Order Processing

• Always use reputable purchase order software
• Keeps the details to the point with clarity for a better procurement process
• Include the purchase order number and keep it unique for every PO for better tracking
• Mention the vendor details after varying
• Keep track of the order status
• Cross check the details before sharing it with the vendor

What Is a Purchase Order (PO) Number?

A PO number is a unique number that is assigned to every PO that is freshly generated. This number acts as an identity to the particular PO. An individual may identify a purchase order by its purchase order number. Thus, it simplifies the tracking.

Accounting software often generates this number instantly whenever a new sales invoice is created. The customer and the seller use it to track the transaction from beginning to conclusion and by the seller on subsequent invoices.

Reconciling orders requires PO numbers on invoices. Therefore, verifying that the goods stated on an invoice were bought and received is essential by comparing the invoice number to the corresponding purchase order number (PO number).

What Is an Invoice?

An invoice is a financial document that the seller issues to request payment from the buyer. This document is released after agreeing to purchase order terms and after selling products or goods to collect payment from the client/customer.

An invoice is not a legally binding document, but it establishes clear communication and understanding of the billing. The invoicing process should be accurate and efficient to keep a healthy cash flow.

Following the delivery of a finished product or the completion of a service specified in a purchase order, the seller issues a regular invoice. After receiving the invoice the buyer commits to the terms of payment.

A typical Purchase Order covers the following information –

• Date of invoice, invoice number, and due date
• PO number
• Currency
• Shipping method
• Client details like name, address, and contact number
• Business details like name, address, and contact number
• Description of product or services with quantity & rate
• Details of applicable tax and discount
• Payment options that the company accept
• Terms and conditions related to the payment

Best Tips for Efficient Invoice Processing

• Add the details in a concise manner
• Always include the invoice number
• Don’t forget to include payment terms in an invoice
• Provide multiple payment options to the client for a better invoicing process
• Always use invoice templates from reputable invoicing software
• Mention the due date
• Don’t forget to review the invoice before sending it to the client

Why Are Invoices Important?

Invoices are helpful in keeping the billing process on the right track and keeping a healthy cash flow while ensuring all the due payments are paid timely. Apart from that, they also contribute in the following ways.

1. Legal Supportive Document

Although an invoice is not a legally binding document it serves as perfect evidence during the legal process. It is a helpful document for resolving disputes because it contains all the details related to payment terms, business, client, and product or service price.

2. Payment Tracking

Invoices are very helpful in tracking payments. Both vendor and customer can track the payments using invoices.

3. Keep Detailed Records

In business, it is essential to document & maintain everything. For example, a customer’s outstanding balance and whether or not payment has been received may all be seen on their custom invoices.

4. Easily Submit Your Taxes

To file their taxes, businesses must keep records of their revenue and expenditures for the preceding fiscal year. The tax process is simplified by having paid invoices serve as receipts.

Invoices, sales receipts, and paid bills are papers the IRS suggests preserving for at least three years since they provide evidence for the accounting entries you’ve made. You can quickly finish your company’s tax return if you keep track of the dates and amounts of your invoices.

Key Differences Between Purchase Order and Invoice

In invoice vs purchase order, the major difference is on the basis of their purpose and time of generation.
When it comes to the differences between the Purchase Order and Invoice, here are the key factors –

Most Similarities Between a Purchase Order and Invoice

After uncovering purchase orders vs invoices, we now focus on their similarities. It’s easy to confuse both purchase orders and invoices since they sound similar. Both involve exchanging information about a product or service for commercial gain.

A few common similarities between the two documents are –

• Both have a unique number
• Both describe the sales and services delivered
• Both describe the total value of purchases made or recurring purchases, inclusive of taxes
• They are crucial to the process of cost-cutting optimization
• In the purchase process, they provide more transparency
• Price, primary purchase data, vendor information, and delivery information are all included
• Both documents are helpful in the legal process

Why Do Companies Need Both Purchase Orders and Invoices?

Since they’re both crucial, you can’t choose between a purchase order and an invoice. Invoices may be essential from a billing perspective, but purchase orders provide much-needed clarity and help avoid disputes.

With the use of invoices, purchase orders (POs) and sales invoices, miscommunication may be avoided by clearly outlining the expected outcomes of the transaction, regardless of whether demand is rising, falling, or remaining steady.

Issuing Purchase Orders and Invoices

Forms like invoices and purchase orders may be easily understood and used. Such documents require precision. However, creating invoices manually by hand is still a tedious and error-prone process.

As a result, conflicts or audits may be complicated by the loss or disorganization of manual records. Purchase invoices with the account of accounts payable and accounts receivable can be important financial documents for both the buyer and seller.

The good news is that time-consuming paperwork may be avoided thanks to digital PO and invoicing. In addition to saving on the cost of photocopying and postage, eliminating these two processes means that you may issue more purchase orders and invoices every day without breaking the bank. In addition, using a digital option is less complicated and more convenient.

You may consider using invoicing software online (Like Moon Invoice). It has all the features that make your invoicing effective, such as automated payment reminders, recurring billing, reporting, payment alternatives, activity monitoring, and more, before making a final decision.

How to Manage Your Company’s Purchase Orders Using Moon Invoice?

Keeping track of company funds using a desktop or mobile app is an excellent method to maintain order and maximize productivity. Moon Invoice has user-friendly, adaptable, and industry-specific invoicing software. It can help you create outstanding invoices.

For instance, Moon Invoice’s online invoice generator allows you to create customized invoice templates, and electronic money regulations, prepare purchase orders, sort out duplicate requests, automate tax calculations, and create smart business reports. You can also collect money and manage payments with Moon Invoice.

In a large organization, different departments work on various large projects and it is a crucial part of accounting to maintain communications. Moon Invoice is a better way to send an invoice for the important role of finance management and remove the added burden from.

If you want to try our online invoicing software for free – contact us NOW!

Verdict

Purchase orders and invoices are two crucial financial documents for every business, and professionals must handle them well. They keep the buyer-seller relationship well maintained. The purpose of both documents is different, but the value of both is the same. So far, we have presented sufficient knowledge of PO vs invoice that every business professional must know.

What is the difference between a purchase order and an invoice? We hope this is no more a big puzzle for you.

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