Invoice vs Purchase Order
Have you heard about a document called purchase order? Yes, but don’t know what it is and confuse between this and an invoice? Then this article is for you and others who cannot differentiate between a purchase order and an invoice.
If you are starting out on a small business, you need to understand what a purchase order is. This is what goes from a buyer to a seller specifying the amount, quality and number of different products needed by the party and the rates at which they are expected. This is described as a legal offer by the buyer to the seller and also serves as a legal defense for the seller should the buyer refuse to accept the goods and services once the seller has produced them and the buyer refuses to pay for them on a flimsy ground. A purchase order, once accepted by the seller serves the purpose of a contractual agreement between the two parties. The buyer agrees to purchase the items mentioned in the purchase order at specified rates, and the seller agrees to supply all the items mentioned in PO to the buyer at the same rate and quality. A purchase order is not a sacrosanct document and many details of a PO can be renegotiated if they do not suit the seller or the seller can point out to any errors in the document which will then be reissued.
It has become common these days to issue electronic purchase orders and they are now sent through mail rather than in a printout form.
On the other hand, an invoice is a document that goes from a seller to the buyer and it signifies that the seller wishes to have payment for the goods or services supplied by him earlier. A buyer needs to make payment upon presentation of invoice and he is entitled to get discount, if any, mentioned in the invoice. Usually the invoice is sent along with the goods or services supplied but a seller can issue it when the payment is due and it is obligatory upon the buyer to make a payment when it is presented to him.
Difference Between Invoice and Purchase Order
• An invoice is a document from the seller to the buyer whereas a purchase order is a document from the buyer to the seller.
• An invoice is a reminder for payment and the buyer needs to make payment for the goods and services he has already received.
• A purchase order is a like an offer document from the buyer to the seller in which he specifies the quantity and quality of materials required along with rates. It serves the purpose of a contractual agreement between the two parties.