A purchase order says "I want to buy this." An invoice says "you owe me for this." They are issued by different parties at different stages of a transaction.

What Is a Purchase Order?

A purchase order (PO) is a document created by the buyer and sent to the seller. It formally requests specific goods or services at agreed prices. A PO typically includes:

  • PO number
  • Buyer's company details
  • Description, quantity, and price of items requested
  • Delivery date and shipping address
  • Payment terms
  • Authorized signature

Once the seller accepts the PO, it becomes a binding contract.

What Is an Invoice?

An invoice is created by the seller and sent to the buyer after the goods are delivered or services are completed. It requests payment for what was provided. An invoice includes:

  • Invoice number (often referencing the PO number)
  • Seller's company details
  • Itemized list of goods or services delivered
  • Total amount due
  • Payment terms and due date

How They Work Together

The typical flow is:

  1. Buyer sends a PO — "We'd like 50 units of Product X at $20 each"
  2. Seller accepts the PO — confirms they can fulfill the order
  3. Seller delivers the goods or services
  4. Seller sends an invoice — "Here's the bill for the 50 units we delivered, as per PO #4521"
  5. Buyer matches the invoice to the PO — verifies quantities, prices, and terms match
  6. Buyer pays the invoice

This matching process is called three-way matching (PO, delivery receipt, and invoice) and is standard in most businesses.

Key Differences

  • Who creates it: PO = buyer; Invoice = seller
  • When it's sent: PO = before fulfillment; Invoice = after fulfillment
  • Purpose: PO = authorization to buy; Invoice = request for payment
  • Legal role: PO = purchase contract; Invoice = payment demand

Example

A restaurant orders supplies from a food distributor:

Purchase Order #PO-8832 (created by the restaurant)

  • 20 cases of olive oil — $45/case — $900.00
  • 10 cases of pasta — $22/case — $220.00
  • Delivery by: November 15, 2026

Invoice #INV-2026-1104 (created by the distributor after delivery)

  • 20 cases of olive oil — $45/case — $900.00
  • 10 cases of pasta — $22/case — $220.00
  • Total: $1,120.00
  • Reference: PO-8832
  • Payment Terms: Net 30

The restaurant's accounting team matches the invoice to PO-8832, confirms the delivery was received, and approves payment.

Common Mistakes

  • Skipping the PO. Without a PO, there is no paper trail to verify what was ordered vs what was billed.
  • Mismatched numbers. If the invoice does not reference the PO number, the buyer's accounts payable team may delay payment while they investigate.
  • Price discrepancies. If the invoice shows different prices than the PO, the buyer has grounds to dispute it. Always match the agreed pricing.
  • Not using POs for large orders. Small purchases may not need a PO, but anything over a few hundred dollars should have one for accountability.