Do You Know the Difference Between an Invoice and a Purchase Order?

Starting your own home business can mean that a person needs to become educated and business-savvy very quickly. While some of us have a background in business and a better handle on terms and contracts—others of us have to create a very short learning curve in order to get up to speed and operate our home businesses. A lot of the terminology and details in the business world can be confusing. I thought I would focus on some of the basics and offer a brief explanation of the difference between and “invoice” and a “purchase order.” Many people use them interchangeably, but they are actually very different documents.

An invoice is a document that is issued from a SELLER to a BUYER. This would be something that a business or contractor would send out to a customer or client who has or is purchasing a product or service. An invoice can also be called a bill or a billing statement and it is generally a document that details the services that have been or will be provided (or the items purchased), quantity, price, and other details. By accepting an invoice, a BUYER is basically making a contractual agreement to make the purchase.

A purchase order is a document that is issued from a BUYER to a SELLER. A buyer who is interested in making a purchase of products or services sends the document to the seller. A purchase order will also detail the services or the items to be ordered or purchased, including the quantity, price and other details. A purchase order also serves as a contractual agreement. The buyer is agreeing to make the purchase, and the seller, upon accepting the purchase order, is agreeing to provide the goods or services according to the specifics in the purchase order.

It is important to remember that details can be negotiated and changed and human errors are made. So, if there is a wrong amount on an invoice or purchase order—or something else changes—it can be renegotiated, changes made to the document, and the final agreement carried out.

See Also: Should You Be Using Contracts?

Writing as a Business

Freelance Writers Need Contracts