Invoice vs Purchase Order: What Is the Difference?
Invoices and purchase orders are both documents about a transaction, but they serve opposite purposes and come from different sides of a deal. Understanding the difference prevents payment delays and confusion.
What a purchase order is
A purchase order is a document the buyer sends to the seller before goods are delivered or work begins. It specifies what is being ordered, how much, at what price, and any delivery or payment terms. When the seller accepts it, it becomes a binding agreement. Many larger companies and government entities require a PO before any work can start, and their finance teams will not process an invoice without a matching PO number.
What an invoice is
An invoice is a payment request from the seller to the buyer, issued after goods are delivered or services are completed. It shows what was done, the amount owed, and when payment is due. If a purchase order was raised, the invoice should reference the PO number so the buyer's finance team can match the two documents.
How they work together in a formal process
- Buyer creates a PO and sends it to the seller.
- Seller delivers the goods or services.
- Seller issues an invoice referencing the PO number.
- Buyer's accounts payable team matches the invoice to the PO (and often a goods receipt) before approving payment.
- This three-way match process (PO, invoice, receipt) is standard in larger organisations.
When a PO is not required
Many small businesses, freelancers and direct-to-consumer transactions skip the PO entirely. The seller delivers the work and invoices directly. For recurring clients, a contract or statement of work serves the same authorization purpose without the per-transaction overhead.
Why referencing a PO on your invoice matters
If a client uses a PO system and your invoice does not reference their PO number, their accounts payable team will typically hold the payment until the PO is located and matched. Always ask new clients whether they raise POs before starting work, and get the number before you invoice.
Invoice Studio lets you create clean, professional invoices on your iPhone, with custom fields for PO numbers and payment terms. For more on payment terms, see the article on invoice payment terms explained.
Common questions
- Do I need a purchase order to send an invoice?
- No. Many businesses, especially freelancers and small service providers, invoice without a purchase order. A PO is only required when the client specifically requests one or when their system requires it for payment processing.
- Who creates the purchase order and who creates the invoice?
- The buyer creates the purchase order. The seller creates the invoice. The PO specifies what is being bought; the invoice confirms what was delivered and what payment is owed.
- What happens if my invoice does not have a PO number?
- At businesses with formal PO processes, an invoice without the correct PO number is often held or returned unpaid. Always ask new corporate or government clients if they use POs, and get the number before invoicing.
- Can a purchase order replace an invoice for accounting purposes?
- No. A PO is a commitment to buy; an invoice is the formal payment request. Both are needed for a complete accounting trail. The invoice records the liability and triggers the payment run.