Purchase Order vs Invoice: What Are the Differences and How to Manage Them

Purchase order vs invoice is an important distinction that is often misunderstood, as many people mistakenly believe these documents are similar. Purchase orders and invoices are frequently used in today’s business world, but they serve different purposes, especially in the procurement process. Both purchase orders and invoices play crucial roles in business transactions, each with its own important function.

Misunderstandings about these documents can lead to significant issues, making it difficult to manage the procurement process effectively. In this article, we will explore the differences between purchase order vs invoice and the best practices for managing them efficiently.

Understanding Purchase Order

Purchase orders, also known as POs, are crucial documents issued by buyer to seller that indicate the purchaser’s intention to purchase specific products or services. The purchase order documents contain an outline of the specific items, which include:

1. PO Number: A unique identification number for each purchase order, used to help in tracking.
2. Date of Purchase : The date when the purchase order was issued by the buyer
3. Delivery Date: The date that the buyer expects to receive the products or services.
4. Order Details: A description of the product or service being ordered.
5. Quantity: The quantity of products or scope of services needed.
6. Price: The price of the product or service.
7. Payment Terms: Payment specifications, such as net 30 days.

Understanding Invoice

Invoice is a document issued by a seller or vendor to the buyer as proof of purchasing a product or service. Invoices contain transaction details for the goods or services purchased, including :

1. Invoice Number: a unique number that identifies the invoice.
2. Seller Information: information about the seller or vendor who is issuing the invoice. The information includes the company name, address, and email address.
3. Buyer Information:  details on the customer who purchased the product or service.
4. Invoice Date: the date when the invoice was generated and sent to the buyer.
5. Details Item: a list of products or services purchased, including quantity and price.
6. Total Amount Due: the total price of the products or services, including any applicable taxes, discounts, or other fees.

The Difference Between Purchase Order vs Invoice

1. Document Issuance: A purchase order is issued by the buyer to request a product or service, while an invoice is issued by the seller to request payment for the products or services provided.
2. Timing: Purchase orders are generated at the beginning of a transaction to formalize the order, whereas invoices are issued after the product or services have been delivered.
3. Purpose: Purchase orders are intended to confirm the order’s details and terms. Invoices to request payment and provide details of the transaction.
4. Legality: When the seller accepts a purchase order, it becomes a legally binding contract. While an invoice is a financial document used to collect payments, it is not a contract in and of itself.

How to Manage Purchase Orders and Invoices with Fintelite OCR

As we know, purchase orders and invoices are critical documents in a business. Companies often handle a large volume of these documents, which need to be managed efficiently. Fintelite OCR is a suitable tool for managing various types of documents, especially purchase orders and invoices.

Fintelite OCR can extract data from invoices and purchase orders 10x faster with over 90% accuracy. This significantly reduces the manual work that can take hours and minimizes human error. The user-friendly dashboard of Fintelite makes it easy for employees to manage the data without needing extensive training.

The dashboard also integrates with accounting platforms like Xero, Jurnal, and QuickBooks, making it easier for accountants and finance teams to handle data. By automating the OCR process with Fintelite, businesses can save up to 30% in time and costs.

If you are curious about the capabilities of Fintelite OCR, you can try it for free. Furthermore, you can organize a free session with a Fintelite AI expert to address your specific needs.