Purchase Order vs Invoice: What's the Difference?
Clear comparison between purchase orders and invoices — two essential documents in the procurement process that serve very different purposes.
Purchase Order (PO)
Invoice
Detailed Comparison
| Feature | Purchase Order (PO) | Invoice |
|---|---|---|
| Document Issuer | Buyer | Seller |
| Timing | Before delivery | After delivery |
| Purpose | Commit to buy | Request payment |
| Contains | Items, quantities, prices, terms | Amounts due, tax, payment terms |
| Legal Status | Binding contract | Tax invoice |
| Used in Three-Way Match? | Yes (PO side) | Yes (Invoice side) |
Quick Summary
- ✓ A Purchase Order is issued by the buyer BEFORE the transaction to commit to a purchase.
- ✓ An Invoice is issued by the seller AFTER delivery to request payment for goods/services delivered.
- ✓ Both documents work together in the three-way match process: PO + Receipt + Invoice = Payment approval.
When to Use Each
Choose Purchase Order (PO)
Issue a purchase order whenever you commit to buying goods or services. It creates a paper trail, protects both parties, and enables proper budget tracking.
Choose Invoice
The seller issues an invoice after delivering goods or services. It's a formal payment request that includes tax information and payment terms.
Frequently Asked Questions
Can I receive goods without a PO?
Technically yes, but it's poor practice. Without a PO, you lose price protection and audit trail.
What is a three-way match?
It's a control process matching the PO, goods receipt, and invoice before approving payment.
Do I need both documents for every purchase?
Yes. PO before purchase, Invoice after delivery. They form the foundation of procurement accounting.
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