Difference Between Similar Terms and Objects

Difference Between Purchase Order and Invoice

a Purchase Order vs an Invoice

In every selling business, there are two parties involved, the buyer and the seller. The buyer is the one looking for the goods, the products or the service, while the seller is the one extending the goods, the products and the services in exchange for cash or money.

So let’s say example, the seller is XYZ Foods Inc. They sell various biscuits and cookies in wholesale. Wholesale means selling in bulk. A buyer has to buy in volume in order to get the products. So, the buyer has to make a purchase order and in return, XYZ Foods Inc. has to give the buyer an invoice of the amount in order to get paid.

Companies use the purchase order and invoice system because it is the proper way to track their inventory and their sales. Bulk selling is impossible if there is no evidence of it. The questions are: Who is buying? Who is to be charged for the sale? What are they buying? How much is it? When is it due for delivery?

This is the distinction between a purchase order and an invoice.

What is on the purchase order?

A purchase order comes from the company buying the products, goods or services. The invoice is the bill or statement coming from the seller which is being made in accordance with the purchase order. This means that the purchase order comes first before the invoice can be sent. The simple explanation to this is that the purchase order carries with it the needs of the buyer. The seller can’t provide without information until a specific order comes.

The purchase order has the buyer’s company name, company slogan and/or company logo. It has the address and contact number of the buying company. Also, there must be a purchase order number for control purposes. This is the number to be used in the buying deal.

It also has an addressee which is the seller and a ship to detail which is usually the seller. In some instances, the ship to is for another entity other than the buyer, but the responsibility of paying goes to the buyer or the one who made the purchase order.

Of course, it has the details of the goods, products or services – quantity, unit, description, unit price and total. Most importantly, it has the purchase order date, requisitioner, shipping details and payment terms.

What is on the invoice?

How will the buyer know about how much the products cost? What is the evidence of the buyer that goods, products or services are being prepared for the company? This is the purpose of the invoice. Upon receipt of the purchase order, the seller will then check if the order can be fulfilled. If it can be delivered, the invoice will then make its way to the buyer. The purchase order is the communication from buyer to seller and the invoice is the answer from seller to buyer.

The invoice includes the seller’s company name, logo and slogan. It also has an invoice number for control reasons. The bill to portion is for the company who made the purchase order. It has everything coinciding with the purchase order except the invoice has the column named part number – control number of the products or goods being sold to the buyer.

Summary:

1. The purchase order is prepared by the buyer, while the invoice is prepared by the seller.
2. The purchase order has on it the goods, products or services needed by the buyer, while the invoice has on it the price of the goods, products or services being sold.
3. The purchase order and invoice have everything the same – from quantity to products and shipping details, except: the purchase order has ship to section which may or may not be the buyer himself but still, the buyer is responsible for payment. The invoice has the part number column for establishing inventory control.
4. The purchase order has the purchase order number, while the invoice has both purchase order number and invoice number on the face of the invoice.


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3 Comments

  1. Great post! Invoices are an annoying but essential part of business. Thanks for the tutorial.
    Chris
    http://www.nirvaha.com/invoice-template.html

  2. Great post … this has stupid proofed a fundamental of trade between businesses!

    Seriously … I thought I was going to go in for a refund on my degree for a second viewing the aspect of Purchase Order versus Invoice etc.

  3. Nice post, thanks for explaining the POs and the invoices.

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