The short answer
A purchase order is sent by the buyer before goods or services are delivered. It says "I want to buy these items at these prices." An invoice is sent by the seller after delivery. It says "Here's what you owe me for what I delivered." The PO initiates the transaction; the invoice closes it.
Purchase order vs invoice: side-by-side comparison
Here's how the two documents compare across key dimensions:
- Who sends it — PO: the buyer. Invoice: the seller.
- When it's sent — PO: before delivery. Invoice: after delivery.
- Purpose — PO: authorize and request a purchase. Invoice: request payment for goods or services delivered.
- Legal status — PO: becomes a contract when accepted by the vendor. Invoice: a payment request, not a contract.
- Key identifier — PO: PO number. Invoice: invoice number (should reference the PO number).
- Triggers — PO: triggers the vendor to fulfill an order. Invoice: triggers the buyer to make a payment.
How purchase orders and invoices work together
In a standard procurement workflow, POs and invoices are connected steps in a single process:
- Buyer creates a purchase order — specifying items, quantities, prices, and delivery terms.
- Vendor accepts the PO — confirming they can fulfill the order at the stated terms.
- Vendor delivers goods or services — as specified in the PO.
- Vendor sends an invoice — referencing the PO number, with the actual quantities delivered and the amount due.
- Buyer matches invoice to PO — a process called "three-way matching" (comparing PO, delivery receipt, and invoice) to verify accuracy before approving payment.
- Buyer pays the invoice — according to the agreed payment terms.
This PO-to-invoice workflow creates a complete audit trail for every purchase. It protects both the buyer (who can verify they received what they ordered) and the seller (who has documented proof of what was agreed).
When you need a purchase order but not an invoice
You issue a PO when you want to formalize an order before it's fulfilled. There's a window between sending the PO and receiving the invoice where only the PO exists. This is the commitment phase — you've authorized the spend but haven't received or paid for anything yet. This is useful for budget planning: you can track committed spending (open POs) separately from actual spending (paid invoices).
When you need an invoice but not a purchase order
Not every purchase requires a PO. Small, one-off purchases — a $15 lunch for a client meeting, a $50 software subscription — often skip the PO process. The vendor simply sends an invoice after providing the service. Many businesses set a threshold: purchases below $250 (or whatever fits your business) don't need a PO, while anything above does. For more on invoicing, see our guide to creating professional invoices.
Three-way matching explained
Three-way matching is the process of comparing three documents before approving a vendor's invoice for payment:
- Purchase order — what you ordered (items, quantities, prices)
- Receiving report — what you actually received (items and quantities delivered)
- Invoice — what the vendor is charging you
All three should match. If the invoice shows 100 units but you only received 80, or if the invoice price is higher than the PO price, there's a discrepancy to resolve before paying. Three-way matching prevents overpayment, duplicate payments, and fraud.
Common mistakes to avoid
- Using a PO as an invoice — they're different documents. Always issue a separate invoice referencing the PO number.
- Skipping PO numbers on invoices — vendors should always reference the PO number on their invoice. Without it, the buyer's accounts payable team can't match and approve the payment.
- Not matching before paying — always compare the invoice to the PO before approving payment. Discrepancies in quantity or price should be resolved first.
- Informal purchase agreements — verbal or email-only agreements lack the documentation trail of a proper PO. If it's worth buying, it's worth documenting.