What is the difference between a purchase order and an invoice?
The main difference between a purchase order and an invoice is the person who is responsible for creating them. Purchase orders are created by a business who plans to purchase goods or services from another business. Invoices are created by the business providing the goods or services. The purchase order outlines what products or services are being purchased, and the invoice is created with those same items once the order has been filled, or the service has been performed.
What information is on a purchase order?
The purchase order lists the following items:
- The name and contact info of the company requesting the products or services
- The name and contact info of the vendor providing those products or services
- Purchase order number (P.O. #)
- Shipping information and terms
- Product/service name, description, price, etc.
- Total due, including sales tax, and discounts
- Notes and/or instructions
- Authorized signature
The invoice the vendor company creates based on the purchase order contains virtually the same information.
How does the customer get the information they need to put on a purchase order if they don’t have an invoice yet?
A customer may initially request an estimate before deciding if they want to hire a given business. Once they decide to purchase items or services, they may use the information from the estimate to create the purchase order.
Here’s an example:
Let’s say you run a lumberyard. A potential customer, a home building company, contacts you asking for an estimate on the purchase of a certain amount of lumber and other supplies. You create an estimate in ZipBooks, and send it over to them.
Their purchasing department receives approval for the purchase. They create a purchase order, using the information from the estimate, and send it to you. You prepare the items for shipping and convert the estimate to an invoice, with all the same information, including the PO # they assigned to the transaction.
Once they receive the order and pay your invoice, the transaction is complete and both parties have the desired paperwork to record the sale.