Understanding all of the paperwork you need to file for your new business can be a little confusing at first. And if you’re a business that deals with physical inventory, you’ll likely be juggling both purchase orders and invoices—but what exactly is the difference between the two? In this post, we’ll explain how each is used, the differences between them, and how they can help your business run smoothly.
A purchase order (PO) is a document that states the types and quantities of products being purchased by your customer. It also includes the prices of each item, how your customer will pay, the delivery date of the order, and other terms and conditions.
If you have long term customers who order the same products frequently, they can create what is called a “standing purchase order.” A standing PO makes it possible for that customer to order the same products or services multiple times over a period of time using the same PO number.
POs are used to tell a supplier how much of a product to deliver to the customer and when the customer will pay for the goods they receive. If managed efficiently, your PO database will help you track how much inventory you’ve sold to each of your customers, when invoices are due from those customers, and when you need to reorder inventory from your own supplier or manufacturer.
Your PO history will also help prevent you from overstocking your inventory, prevent orders from being mixed up, and ensure that your customers receive their orders on time.
Invoices are used in conjunction with purchase orders to indicate how much money the buyer owes to the seller. Invoices are also commonly referred to as “bills,” “statements,” or “sales invoices.”
An invoice usually describes the products that were delivered to the customer, the price of those products, and the payment terms. Most modern-day businesses use an online invoicing tool (like ZipBooks!) to send invoices and receive payment from customers.
Used properly, invoices can help small businesses track revenue and expenses, and provide a written record of the goods and services delivered to your customers and how much each customer was charged, making it easier to tell which accounts are complete and paid for, and which accounts still have outstanding balances.
Keeping an accurate invoice database also makes it easier to pay your business taxes, because it will show exactly how much revenue you collected during the tax year.
An intelligent online invoicing system can also schedule payment reminders for your customers and notify you when payments are received so you don’t have to send awkward emails when it’s time to collect your money.
ZipBooks free online invoicing app makes invoicing your customers for goods or services easy. In just a few clicks, you can send custom invoices to your clients, get paid via credit card, PayPal, or Stripe, and get notified when your customer pays their balance.
Brad Hanks is in charge of Growth at ZipBooks.