What is the difference between an invoice and a purchase order?

An invoice serves as a document created by a vendor to formally request payment for goods or services provided. This document details the items purchased, their quantities, price, and payment terms. Its primary purpose is to trigger the payment process from the buyer to the vendor.

In contrast, a purchase order is issued by the buyer and represents a formal agreement or confirmation of an order placed with the vendor. It outlines the specifics of what is being ordered, including descriptions of the products or services, quantities, and agreed-upon prices before the actual transaction takes place.

Understanding the roles of these documents is essential in the accounts payable process, as they govern the purchasing and payment flow within an organization. The distinction between the two is fundamental: the invoice is focused on receiving payment for completed transactions, while the purchase order is about authorizing and specifying the details of future purchases.