Question

List the differences between purchase orders and invoices.

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Purchase orders is a document created by a customer at the very beginning of the shopping process. It contains information about the desired product:

  • Barcode or product number which uniquely identifies the product - Quantity of desired product
  • Unit
  • Unit cost
  • Total bill amount for all products from that one order.

This type of document expresses the customer's desire to buy products and gives seller concrete information about desired products. Such order is sent to the seller who has to check the availability of products before approving the order. The seller needs to check the product supply, price, etc. Only when the seller concludes that they are able to realize the order, they can confirm it, and it becomes a legally binding document.

Invoice is a document created by the seller as a final step of the selling process. It consists of all elements that were beforehand mentioned in the purchase order. It needs to show a PO number to which it refers. Additional information it contains:

  • Invoice must separately show taxes and fees if the seller is in the business in which they have to pay taxes and/or fees.
  • Payment method: check, cash, credit card.
  • Total price displayed in the invoice has to be identical to the one that was defined and agreed upon during the approval of purchase order.
  • Dating terms that are used to specifically define the date by which customer needs to settle their debt towards the seller in the amount that is specified on the invoice. If there are any shipping costs that customer needs to pay for, they also have to be specified in the invoice.

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