The Difference Between an Invoice and a Purchase Order

Many small business owners, freelancers, and contractors get confused about purchase orders (POs) and invoices — sometimes even sending the wrong document or not understanding why a client is requesting one when they've already received the other.

The two documents serve completely different purposes in the buying/selling process:

• A purchase order is the buyer's request to buy

• An invoice is the seller's bill for work already done

Mixing them up can delay payments, create disputes, or cause accounting headaches. This guide explains exactly what each is, when each is used, their key differences, and real-world examples so you never confuse the two again.

What Is a Purchase Order (PO)?

A purchase order is a document issued by the buyer (your client or customer) to the seller (you) to formally request and authorise the purchase of goods or services.

Key characteristics:

• Issued before any work starts or goods are delivered

• Acts as a written offer to buy—once you accept it, it becomes part of a binding agreement

• Typically includes:

  • Buyer’s company name, address, contact person

  • Seller’s name and contact

  • Detailed list of requested items/services

  • Quantities, unit prices, estimated total

  • Requested delivery date or timeline

  • Payment terms (e.g., Net 30)

  • Unique PO number (for internal tracking)

  • Approval signatures or stamps (especially in larger companies)

Purpose:

• Controls spending (gets internal approval before committing money)

• Sets clear expectations (scope, price, timeline)

• Provides a reference number for matching later payments

What Is an Invoice?

An invoice is a document issued by the seller (you) to the buyer (your client) to request payment for goods delivered or services already performed.

Key characteristics:

• Issued after the work is completed, goods shipped, or a milestone is reached

• Acts as a formal demand for payment

• Typically includes:

  • Seller’s business name, address, logo, contact info

  • Buyer’s name and contact

  • Unique invoice number

  • Invoice date and due date

  • Itemized list of delivered services/products

  • Actual quantities, rates, subtotals, taxes/discounts

  • Total amount due (bold and prominent)

  • Payment instructions (methods, bank details, late fees)

Purpose:

• Requests payment

• Records revenue for your accounting

• Provides proof of transaction for taxes and audits

• Triggers the buyer’s obligation to pay

Real-World Examples

Example 1: Freelance Graphic Designer

• Client emails: “We’d like to hire you for logo design—$800."

• The client sends Purchase Order #PO-789 for “Logo Design Package – $800” (their internal approval).

• You accept the PO and start work.

• After delivery, you send Invoice #INV-456 for $800, referencing “PO #789".

• The client pays the invoice (not the PO).

Example 2: House Painter

• The homeowner approves the quote and issues PO #PO-101 for “Interior Repaint – 3 Bedrooms – $3,200.”

• You complete the job.

• You send Invoice #INV-202 itemising labour + materials + tax = $3,200, noting “Per PO #101.”

• The homeowner pays the invoice.

Example 3: Recurring Commercial Cleaning

• The company issues one PO for the annual cleaning contract ($12,000/year).

• You send a $1,000 monthly invoice referencing the original PO.

Why Both Documents Are Important

• The PO protects the buyer (budget control and internal approvals)

• The invoice protects the seller (clear demand for payment and proof of debt)

• Together they create a clean audit trail: PO (authorisation) → Work delivered → Invoice (payment request) → Payment

How GenerateInvoice.net Helps with Invoices (Not POs)

GenerateInvoice.net is for creating invoices—the documents you send to get paid.
Features that make invoicing smooth:

• Reference client PO numbers in notes or custom fields

• Itemize services accurately (matches PO expectations)

• Auto-calculations for actual amounts

• Professional templates, PDF downloads, shareable links

• History tracking to prove delivery if disputes arise

Head to https://generateinvoice.net, choose a template, add any PO reference in the notes section, and send a clear invoice that gets paid faster.

Quick Summary: Invoice vs. Purchase Order

• Purchase Order = Buyer says, “We want to buy this from you” (before work)

• Invoice = Seller says, “You owe me for this completed work” (after delivery)

Remember:
PO starts the process → Invoice ends it and gets you paid.