Purchase Order vs. Invoice: What's the Difference?

A purchase order (PO) is a buyer's request to purchase goods or services. An invoice is a seller's request for payment. They belong to the same purchasing cycle, but they are created by different parties and serve different controls.

Purchase order vs invoice at a glance

Document	Created by	Purpose	Timing
Purchase order	Buyer	Authorize and document a purchase	Before delivery
Invoice	Seller	Request payment	After or around delivery

What is a purchase order?

A PO documents what the buyer intends to purchase before the order is fulfilled.

Typical fields include:

• PO number
• supplier
• items and quantities
• unit cost
• delivery location
• expected delivery date
• payment terms
• buyer or approver

What is an invoice?

An invoice is sent by the seller to request payment for goods or services supplied.

Typical invoice fields include:

• invoice number
• supplier information
• items or services
• quantities
• prices
• taxes
• amount due
• payment terms

Example purchasing flow

1. A retailer creates PO #1042 for 100 units at $12 each.
2. The supplier confirms the order.
3. The shipment arrives with 96 units.
4. Receiving records 96 units, not 100.
5. The supplier sends an invoice.
6. The buyer compares the PO, receipt, and invoice before approving payment.

What is three-way matching?

Three-way matching compares:

1. the purchase order
2. the receiving record
3. the supplier invoice

The goal is to verify that the business pays for what it ordered and actually received.

Why purchase orders matter for inventory

POs create visibility into incoming stock before it arrives.

That helps buyers avoid:

• duplicate orders
• reordering products already inbound
• unclear supplier commitments
• receiving stock with no expected order

Why invoices should not update inventory by themselves

An invoice is evidence of what the supplier is billing. It does not necessarily prove what physically arrived.

Inventory should normally be updated from receiving or another verified physical-stock event, not from invoice quantity alone.

PO vs invoice vs receipt

• PO: what the buyer ordered
• Receipt: what physically arrived
• Invoice: what the supplier wants to be paid for

These three documents can differ, which is why reconciliation matters.

Common discrepancies

• partial shipment
• wrong item
• damaged stock
• different unit price
• unexpected freight
• invoice quantity higher than received quantity
• duplicate invoice

Do small businesses need purchase orders?

Not every microbusiness needs a formal PO process. POs become more valuable when:

• multiple employees buy inventory
• purchase volume grows
• several suppliers are involved
• deliveries are partial
• locations receive stock separately
• approval controls matter

How purchase orders improve forecasting

Open purchase orders show future inventory already committed. Replenishment decisions should consider on-hand stock plus reliable inbound inventory so teams do not buy the same demand twice.

How Stash fits

Stash connects inventory, suppliers, purchase orders, receiving, forecasting and multiple locations so purchasing records stay tied to the stock they are meant to replenish.

Frequently asked questions

Is a PO legally the same as an invoice?

No. They are different commercial documents created for different purposes. Contract and accounting treatment can vary by jurisdiction and agreement.

Can an invoice exist without a purchase order?

Yes. Some businesses buy without formal POs, but this provides less pre-purchase control.

Should a purchase order increase inventory?

Usually not until goods are actually received. An open PO represents incoming inventory, not physical stock on hand.

Can received quantity differ from invoiced quantity?

Yes. That is one reason businesses reconcile the documents before payment.

Next steps

Connect purchase orders to a disciplined inventory receiving process so stock only increases when goods physically arrive.

Purchase order approval controls

As a business grows, POs can act as a spending-control system. A common workflow requires approval when an order exceeds a threshold, uses a new supplier, or falls outside an agreed buying plan.

This creates a record of who authorized the purchase before the company becomes financially committed.

What happens with partial deliveries?

If a PO requests 100 units but only 60 arrive, receive 60 and leave the remaining 40 open if they are still expected. The invoice should then be checked against the actual shipment and agreed terms.

Closing the entire PO after a partial delivery can hide outstanding inventory; receiving all 100 when only 60 arrived overstates stock.

Purchase order numbering and audit trail

Unique PO numbers make it easier to connect supplier communication, receiving records and invoices. Avoid reusing PO numbers or editing old orders in ways that destroy the original purchasing history.

POs for multiple locations

Multi-location businesses should identify the destination location on the PO and receiving record. A company can have the right total quantity but still have inventory recorded at the wrong store.

Central buyers can combine supplier purchasing while still allocating expected stock by location.