Purchase order vs purchase invoice: What’s the difference and why it matters

Understanding the difference between a purchase order (PO) and a purchase invoice is key to maintaining control in your procurement process. While these two documents are closely related, they serve very different purposes. Here’s a quick guide to help clarify.

What is a purchase order?

A purchase order is a document issued by a buyer to a supplier, outlining the intent to purchase goods or services. It typically includes:

• Purchase order number
• Item description and quantity
• Agreed prices
• Delivery instructions
• Terms and conditions

Once accepted by the supplier, the PO becomes a legally binding agreement.

More details on what a purchase order is can be found in this article: What is a Purchase Order

What is a purchase invoice?

A purchase invoice is normally created by the supplier after the goods or services have been delivered. It’s a formal request for payment and usually includes:

• Reference to the purchase order
• Delivered items and actual quantities
• Unit prices and applicable taxes
• Total amount due and payment terms

Key similarities

• Both are used in the procurement and accounting process
• Both detail products or services, quantities, and prices
• Both are important for record keeping and audits

Key differences

Why purchase orders are valuable

Using purchase orders helps project-driven businesses stay in control. Benefits include:

• Budget control before spending happens
• Clear approvals and accountability
• Accurate tracking of committed vs actual costs
• Better forecasting and cash flow planning

Manual process vs digital system

Managing POs manually through spreadsheets or email is time-consuming and prone to errors. A digital platform like CostTracker streamlines everything:

• Easily create, approve, and manage POs
• Match invoices to POs with full transparency
• Real-time cost tracking across all projects

Final thoughts

While a purchase invoice records what’s owed, a purchase order defines what was approved to spend. Using both — with a system in place — provides the structure you need for financial control.

CostTracker makes it easy to manage purchase orders and invoices, giving project-based companies full cost visibility and smarter decision-making.

Other articles that might be of interest:

Purchase Orders vs. Purchase Requisitions

8 great benefits of using a purchase order system