The core difference
A purchase order (PO) is sent by the buyer to the seller before the work or goods are delivered. It's an authorization: "I agree to buy this, at this price, under these terms." It's a commitment to pay.
An invoice is sent by the seller to the buyer after the work is done or goods are delivered. It's a request for payment: "Here's what I provided, here's what you owe, here's when it's due."
In a typical transaction: the buyer sends a PO → the seller fills the order → the seller sends an invoice referencing the PO → the buyer pays the invoice.
Who sends each document
This is where people get confused:
- The buyer sends the purchase order.
- The seller sends the invoice.
If you're a contractor being hired to do work, you receive POs and send invoices. If you're ordering supplies from a vendor, you send POs and receive invoices. Same person, different direction depending on which side of the transaction you're on.
When you need a purchase order
Not every transaction requires a PO. For simple services paid immediately — a handyman doing a one-time repair, a freelancer doing a quick project — an invoice alone is often sufficient.
Purchase orders become important when:
- You're ordering materials or inventory from a vendor and need a formal record of what was ordered before it arrives.
- You're working with a company that requires a PO number on every invoice before they'll process payment.
- You're managing multiple orders from the same vendor and need a way to track each one separately.
- The order involves a significant dollar amount and you want written confirmation of the agreed terms before committing.
What each document contains
A purchase order typically includes:
- Buyer's name and contact info
- Vendor/seller's name and contact info
- A unique PO number
- Itemized list of goods or services being ordered with quantities and agreed prices
- Expected delivery date
- Shipping instructions if applicable
- Payment terms
An invoice contains similar information but from the seller's perspective — your name, the client's name, what was delivered, the amount owed, and the due date. If a PO was issued, the invoice typically references the PO number so the buyer can match them in their records.
The matching process
In larger organizations, accounting departments use a process called three-way matching: they verify that the PO, the delivery receipt, and the invoice all agree before authorizing payment. If any of the three documents don't match — wrong quantity, wrong price, missing PO number — the invoice gets held up.
If you're invoicing a company that uses this process and they require a PO number, always get it before doing the work. Invoices without a matching PO can sit in limbo for weeks.
For small contractors: the practical version
If you're a solo contractor or small business:
- When a client says "we need a PO number on your invoice" — ask them to send you a PO first, then put that number on your invoice.
- When you're ordering materials from a supplier for a larger job — send a PO to document exactly what you're ordering and at what price. It protects you if there's a dispute about what was delivered.
- For most simple service jobs with individual clients — an invoice is all you need.