Purchase Order vs Invoice: Key Differences

Who sends a purchase order and who sends an invoice?

The buyer creates and approves a purchase order, then sends it to the supplier. It identifies the supplier, requested goods or services, quantities, prices, delivery, and terms. It may draw against a department or project budget.

The supplier creates an invoice for the buyer after the agreed billing event. It identifies the transaction, amount due, tax, payment terms, and payment instructions. The supplier should reference the buyer’s PO when required.

• Purchase order: the buyer sends it to the supplier
• Invoice: the seller sends it to the buyer
• PO controls authorization
• Invoice requests payment

When does each document appear?

A PO normally appears before goods are shipped or services begin. It gives the supplier evidence of an approved order. Changes should be documented with a revised PO or accepted change process.

An invoice appears after delivery, completion, a recurring period, or an agreed milestone. Deposits and advances may be invoiced earlier when the contract permits. Timing should follow the commercial agreement.

• Purchase order: before commitment, work or delivery
• Receipt or service approval after delivery
• Invoice at the agreed billing event
• Payment after matching and approval

How do purchase orders and invoices get matched?

Two-way matching compares the invoice with the PO. Three-way matching also uses evidence that goods were received or services approved. The reviewer checks supplier, item, quantity, price, tax, freight, total, and references.

Differences may be legitimate, such as an approved change or partial delivery, but they should be documented. A supplier should not change the PO; the buyer controls its own authorization record.

• Match the supplier and purchase-order reference first
• Quantity and price match
• Receipt or approval match
• Documented tolerance or exception

Is a purchase invoice different from a purchase order?

Yes. A purchase invoice is the buyer’s record of a supplier invoice received for a purchase. It is still an invoice, not a purchase order. The supplier sends the invoice; the buyer records it as a purchase invoice or vendor bill in accounts payable.

A purchase order comes earlier and shows what the buyer approved. The purchase invoice shows what the supplier charged. The buyer compares the incoming invoice with the PO and receiving evidence before approving payment. Read the separate purchase-invoice guide for the fields and workflow used after receipt.

• Purchase order: buyer authorization before supply
• Supplier invoice: seller request for payment
• Purchase invoice: buyer’s record of that incoming invoice
• Match all records before approval

How should you connect the records?

Use distinct PO and invoice numbers. Store the approved order, revisions, receipt, invoice, payment, and correspondence together or connect them through references. This creates a traceable purchase-to-payment record.

Not every small purchase needs a formal PO, but businesses should define when one is required. Suppliers should ask new business clients about PO requirements before beginning work to avoid a preventable invoice rejection.

• Keep separate controlled purchase-order and invoice number sequences
• Required PO threshold or policy
• Invoice references the accepted PO
• Linked order, receipt, invoice, and payment

See the whole buying sequence

The buyer approves a purchase and issues a purchase order. The supplier provides the goods or services and sends an invoice. The buyer checks what was ordered, what was received and what is being charged before paying. Smaller businesses may use a simpler process, but the underlying questions remain useful.

A quote from the supplier may precede the purchase order. Keep the approved scope and references connected so the invoice can be matched without asking the project team to explain the transaction again.

What three-way matching checks

A three-way check compares the purchase order, evidence of receipt and the invoice. If ten chairs were ordered but only eight arrived, an invoice for ten needs attention. The difference could be a partial delivery, an invoicing error or another agreed arrangement.

For services, the receipt evidence may be an approved milestone or signed work record. The check should reflect what was actually bought; a service engagement does not need to invent a physical delivery note simply to imitate a goods process.

One purchase order can support several invoices

A long project or staged delivery may be billed in parts. Each invoice should identify the purchase order and the specific period, quantity or milestone. Track the amount already billed and the remaining authorized amount so the whole order is not charged again each time.

If the buyer’s system requires separate lines or references, learn that before invoicing. A correctly calculated invoice can still wait if it cannot be matched to the buyer’s approved purchase structure.

Changes need approval in the buying record too

When scope or price changes, your project contact’s approval may need to be reflected in an amended purchase order or another authorized record. Confirm how the buyer handles this rather than assuming an email is sufficient for their internal payment process.

Show the approved additional work clearly and retain the supporting agreement. Do not squeeze extra charges into an unrelated original line merely to make the invoice fit an outdated order. That makes the record harder to understand and may delay approval.

Ask these questions before starting

Will the client issue a purchase order? Who authorizes it? Which reference must appear on the invoice? Is supplier registration required? Where should invoices be submitted? The answers can often be collected in one short onboarding exchange.

If work is urgent and the order is not ready, confirm the authorized arrangement and how the formal record will follow. Do not assume that a person requesting work has unlimited purchasing authority; clarify what your client’s process requires.

When the invoice is returned

Ask which part does not match: reference, quantity, price, acceptance or remaining authorization. Supply the missing evidence or correct the actual error. Resending the identical invoice without resolving the mismatch rarely changes the outcome.

If a purchase order was never required or issued, explain the underlying agreement and work with the client to identify their legitimate processing route. Do not invent a purchase order number to fill a field.