3 Key Differences between Invoice and Purchase Order

Professionals dealing with procurement handle a lot of documentation while purchasing goods and services. This is why many organizations insist on familiarizing their employees with the necessary financial documents and purchase order data entry during training. To help the new employees perform well at work, we need to educate them about the essential documents and details we need to include in a purchase order entry. In the upcoming section, we will look at some of the significant differences between an invoice and a purchase order- two essential documents that help us make a purchase order data entry.

invoice and purchase order

Basic Difference between a Purchase Order and an Invoice

As the term implies, buyers create purchase orders, and vendors issue invoices. The procurement team acts like the middleman, processing and approving the purchase order to send it to the vendor. Hereafter, the vendor sends the invoice to pay for the goods/ services provided. Given below are other differences.

  1. Details 

What are the details required in a purchase order? A purchase order will only look complete when it has a detailed description of the requirement, the concerned brand, delivery date and address, and the terms and conditions of payment.

On the other hand, an invoice will have the purchase order, invoice number, and item-wise cost list. In other words, the details mentioned in the purchase order help the vendor understand the details for smooth delivery, and those in the invoice are to share the payment details with the buyer.

  1. Timing

If we are the organization that wants to make the purchase, we will begin the transaction by creating a purchase order. This helps us initiate sales by sharing the order with the vendor.

On the other hand, a vendor would issue the invoice for a transaction only after meeting the buyers’ demands. In other words, we create a purchase order initially, and our vendor creates an invoice toward the end of the transaction.

  1. Purpose

We will not make a purchase order data entry or create an invoice for the namesake. Purchase order entry and invoice serve their purposes. While we generate purchase orders to initiate transactions between the vendors and us, they send invoices when after meeting the concerned order.

Now you know some of the factors that distinguish an invoice from a purchase orders. This will help you pay more attention to the details while making a purchase order data entry (also known as purchase order entry). It will also help you minimize errors while you deal with purchase orders and invoices.

Significance of Purchase Order Management System

Purchase Order Management is a crucial function handled by accounting professionals. And it is essential to do purchase order data entry, aka purchase order entry, for every purchase made, irrespective of who we purchased it from. Purchase order data entry has a huge role in helping firms keep track of their expenses and inventories. This is something that is of immense significance for project management. Managing purchase orders can be an arduous task in the absence of a proper purchase order management system. Investing in a sound purchase order management system is one the simplest things you can do in this case. And choosing an electronic PO system can help in several ways, like digital creation and purchase order submission, purchase order tracking, etc. Use a purchase order management system instead of making a manual purchase order entry. The following section will help you understand its significance.

purchase order management

  1. Improves Accountability

An electronic PO system requires us to have certain approvals and login details. It helps us keep track of actions taken on a purchase requisition and makes the related data easily accessible, facilitating better problem-solving. Moreover, it makes things more accountable and helps us adopt better procurement policies.

  1. It Helps Us Take Care Of Contingencies

A well-managed purchase order database will help us deal with unexpected expenses. In addition, it will serve as an early warning system when we make a new purchase order data entry to the system. This will be helpful for finance departments to get better clarity regarding upcoming expenses.

  1. Manage Inventories Better

A purchase order management system helps us efficiently manage inventory and track orders. Moreover, they help you crosscheck purchase orders with invoices to ascertain the accuracy of the inventory. It also enables you to find a 3-way matching to make it more accurate.

  1. Get A Better Idea Regarding Cashflows

Making a purchase order entry helps you better clarify your cash flow. This will enable organizations to identify various trends better, decide whether to retain their vendors/ suppliers, and carry out contract terms. In addition, it helps you stay better prepared by doing budget forecasting, thereby allowing you to make crucial business decisions proactively.

  1. Helps Us Prevent Duplicacy

Making a duplicate purchase order by mistake is one of the most common challenges a firm deals with large volumes of purchase orders. However, having a purchase order management system is one of the easiest ways to eliminate such problems.