What is purchase order?
A purchase order refers to a commercial document sent from a buyer to a supplier that requests products or services. A purchase order is the first official offer issued by a buyer. It’s used to manage the purchasing of items (or services) from suppliers.
A purchase order contains types, quantities, and agreed prices for products or services. It also includes a number for tracking the purchase order throughout the system.
Purchase orders are important because they:
- act as an official agreement between a buyer and a seller
- simplify tracking of a product or service
- make invoicing easier for sellers.
What is the difference between an invoice and a purchase order?
Purchase order and an invoice serve two different purposes.
A purchase order is issued by a buyer. They send purchase orders to suppliers for approval at the start of a business transaction. After the approval, purchase orders become a legally binding document.
An invoice is issued by a supplier when they complete the terms as outlined in the purchase order. An invoice contains the price that buyers should pay after the order has been completed.