A purchase order and an invoice can list the same items, prices and company names. That makes them easy to mix up, and it usually doesn’t matter until a client sends your invoice back asking for a PO number you were never given.
The two documents come from different sides of the deal, at different points.
The buyer sends the purchase order when they want to buy something, and the supplier sends the invoice when it’s time to get paid.
A purchase order, or PO, is the document a buyer sends to a supplier to place an order.
It lists what they’re buying, how many, the agreed price, and when and where it should be delivered. Payment terms often go on it too, along with a PO number that belongs to that one order.
In the UK, a PO is generally treated as an offer to buy.
Once the supplier accepts it, by confirming in writing or by starting the work, the two companies have a contract on the terms in the PO. If the supplier replies with its own terms, read them before work starts, because the last set of terms sent usually becomes the contract.
For the buyer, the PO then doubles as a written record of what was agreed, which helps if a delivery arrives short or late.
Larger companies and public sector bodies rely on POs because purchases there have to be approved before anyone places the order.
They’re useful in a small company too. If a few people on your team buy things for the business, a PO gives you one clear moment to say yes before the money is spent.
The invoice is the supplier’s request for payment.
It goes out once the goods have arrived or the work is done, or at the stages agreed in the PO.
UK rules set out what every invoice must show, including a unique invoice number, both companies’ names and addresses, what you’re charging for, the supply date and the total owed. A limited company uses its full name as it appears on its certificate of incorporation.
A typical purchase goes like this:
- The supplier sends a quote, if the price isn’t agreed yet.
- The buyer sends a purchase order.
- The supplier accepts it and delivers the goods or the work.
- The supplier sends an invoice that quotes the PO number.
- The buyer checks the invoice against the PO and pays.
Some buyers also check the delivery note before paying, so the PO, the delivery note and the invoice all have to agree. A smaller company can keep it simple and compare the invoice with the PO.
You might also come across a pro forma invoice.
The supplier sends it before delivery, often to get paid upfront or to help the client get the purchase approved, and the real invoice follows once the order is supplied. Our post on net 30, pro forma and other invoice terms goes through it in more detail.
If your company is VAT-registered, keep the supplier’s VAT invoice with your records. It’s normally the document you need to reclaim the VAT on what you bought, and the PO sits next to it as proof of what you ordered.
Purchase order number
The purchase order number (PO number) is the buyer’s reference for one approved order.
The supplier copies it onto the invoice, and sometimes onto the delivery note as well. When the invoice arrives, whoever handles payments at the buyer’s company uses the number to find the order and check the details match.
You add it on top of the details UK rules already require, like your details, the client’s details and the amounts.
Many larger companies and councils only pay invoices that carry a valid PO number, so an invoice without one can come straight back to you.
If you supply bigger clients, ask for the PO number before you start, while everyone is still talking about the order. Copy it onto your invoice as it’s written, letters and dashes included. If the job grows or the price changes, ask for an updated PO before you invoice for the extra.
A PO usually has a set value, and an invoice above it can wait until someone approves the difference.
With an Ampere business account, you can create invoices for your clients and keep track of their payments in the same place. You can start sending invoices once your application is approved. Open a business account
When you’re the buyer, compare each invoice with the PO before you pay.
If you find more units than you ordered, or a higher price than the one on the PO, ask the supplier for a corrected invoice or a credit note and pay once the numbers line up.
Some suppliers will ask you for a PO number even if your company has never used one. You can start a simple numbered list for your orders, or tell the supplier which reference you’d like on the invoice.
Either way, you get something to search for later.
When you pay, put the supplier’s invoice number in the payment reference so they can match your money to the right invoice. Save the invoice next to the PO as well, so you can match the payment to its paperwork later.
A small company can run a PO process with very little setup.
A numbered PO, an invoice that quotes it and a payment reference that matches the invoice are enough to make an order easy to trace months later.
