Purchase order vs invoice: who sends which, and when

A purchase order and an invoice often list the same items at the same prices, which is why they are easy to mix up. They come from opposite sides of the sale and at opposite ends of it: the buyer sends the purchase order before anything is delivered, and the seller sends the invoice afterwards, to be paid. This guide compares the two side by side and follows one order from the first document to the last.

Side by side

Each side keeps its own numbering. The PO number is the buyer’s reference and the invoice number is the seller’s; an invoice quotes the PO number, it does not replace its own number with it.

One order, from start to finish

Names and figures are invented.

Larkspur Florist orders supplies from Fernhill Supply.

1. The buyer sends a purchase order. Larkspur makes PO-0120 in the purchase order editor, with Fernhill as the Supplier:

2. The seller ships what it has. Fernhill has only 30 foam bricks in stock, so the first shipment holds the 24 vases, 30 bricks and the 10 rolls of ribbon, with the other 10 bricks to follow. Its packing slip shows what is in the box and what is still to come, as in the partial shipments guide.

3. The buyer records the delivery. Larkspur checks the box against PO-0120 on a goods received note: everything matches the packing slip, and 10 bricks are still outstanding.

4. The seller invoices what was delivered. Fernhill makes INV-0311 in the invoice editor, with Larkspur under Bill to and PO-0120 under Order / PO number:

5. The rest follows. When the last 10 bricks ship, Fernhill sends a second invoice for 10 × 1.20 = 12.00, again quoting PO-0120. The two invoices come to 247.00 + 12.00 = 259.00, the total of the order.

6. The buyer pays the invoices, not the order. Before paying INV-0311, Larkspur compares it with PO-0120 and with its goods received note, as in the three-way match guide. The invoice asks for the 30 bricks that arrived, not the 40 that were ordered, so it matches.

What each document is for

Use a purchase order when you buy and want the supplier to have your order in writing: the items, quantities, agreed prices, delivery date and delivery address. It also gives you something to check the delivery and the invoice against later.

Use an invoice when you sell and want to be paid: it states the amount, the Due date and how to pay, and it is the document your customer files and pays from. The payment terms guide shows how to work out the due date, and the invoice numbering guide how to number your invoices.

Common mix-ups

• Paying from the purchase order. The PO says 259.00, but only 247.00 worth of goods has arrived and been invoiced. Pay the invoice in front of you, after checking it.
• Invoicing the ordered quantity. If Fernhill had invoiced all 40 bricks with the first shipment, Larkspur would be asked to pay for 10 bricks it does not have yet, and would query the invoice. Invoice what went out.
• Leaving the PO number off the invoice. A buyer with many open orders matches invoices by PO number. Without it, the invoice can wait while someone works out which order it belongs to.
• Using the PO number as the invoice number. Each side numbers its own documents. Quote the customer’s number under Order / PO number and keep your own invoice number.
• Treating a quote as an order. A quote or estimate comes from the seller and offers prices. The purchase order is the buyer’s answer: it orders specific quantities at those prices.

See all purchasing documents and service job documents.