In running a business, the terms purchase order (PO) and invoice will often be heard. However, the fact is that there are still many people who do not understand the difference. Although the contents are not much different, PO and invoice have differences that must be known because both have an important role when buying and selling in a business. What is the actual PO and invoice ? How is the difference? Check out the following review.
Purchase Order
Purchase orders or commonly known as POs are goods ordering documents made by the buyer and addressed to the seller. PO is made to clarify the purchase order from the buyer so as to avoid order errors when the goods arrive at their destination.
Benefits and Functions of Purchase Orders
· Securing the Availability of Goods
The main benefit of using a PO system is securing the availability of goods so they are not sold to others. With this PO, the seller will make sure the goods are available, then store them before they are sent at the specified time. PO will really help you who want to order items that are easy to sell on the market.
· Financial Audit
Using the PO system in buying and selling transactions can be evidence of ordering products or goods that are well managed in your company. Apart from being a record of expenses, this can also be a way to prove to banks, auditors, or taxation agencies that your company is conducting business transactions correctly.
· Binding Documents
Purchase orders act as legally binding documents between the buyer and seller. This will certainly be a witness if there is a conflict between the two parties, such as goods not being sent. With the PO system, delivery of goods will be well controlled.
· Make a Clear Order
Purchase orders make the company know what is needed by the buyer. The PO officially documents the operations of the company so that both parties can make the document as a reference to the expected order. The company also has priority over the goods or services being transacted.
Example Purchase Order Details
Date of purchase
Buyer’s
name and address Seller name and address Purchase order
number Details of goods or services ordered Terms and conditions of the transaction
Also read: What is a Purchase Order? Come on, Find Out Understanding and Use!
Invoice
If the PO is sent by the buyer to the seller, the invoice is the opposite. Invoice is a document made by the seller and addressed to the buyer. Invoice is a document that contains proof of an order to collect payment from the buyer for the goods purchased.
Benefits of Invoice for the Company
· M emberikan Spending Visibility for Related Companies
Invoice is an important documentthat is usually needed by every company when making a transaction, especially for large purchases. Invoice contains details of the purchase in detail and precisely so that expenses made by the company can be known transparently.
· Manage Payments
Invoice also serves to track payments in writing because it shows how much money has been spent and what bills your company has not paid.
· Collect Payment for Goods or Services
Invoice is a legal document to collect payment from the buyer. Some companies usually don’t want to spend money if they are billed via e-mail or just telephone. Therefore, the existence of this invoice is very helpful because it contains detailed information about the payments that must be paid by a company.
Example Invoice Details
Invoice date
Seller
name and address Buyer’s name and address Invoice
number Purchase order number , if PO ( purchase order ) issued Details and quantity of goods and services provided Agreed price Discounts and taxes Total amount to be paid Transaction terms and conditions (optional) Date payment due
Also read: How to Make an Invoice for Beginners in the Business Field
What Are the Similarities and Differences between a Purchase Order and an Invoice ?
Apparently there are still many people who are mistaken about PO and Invoice . This of course must be avoided so that the transaction process continues to run smoothly.
1. Equation
- PO and invoiceare both evidence of ordering and purchasing goods between the two parties (buyer and seller).
- POs and invoicesare important documents that are legally bound because they contain agreements on the purchase and ordering of goods between the buyer and seller.
- The information contained in the PO or invoicehas a similarity that contains a detailed list of orders, company names, telephone numbers, and agreed prices.
2. Difference
- The PO is made by the buyer to the seller, while the invoice ismade by the seller addressed to the buyer.
- PO is a document that contains details of ordering goods to be purchased or services used, while the invoicecontains information about billing for goods or services.
- PO is a document that is sent when the buyer orders goods or services, while the invoice issent after the goods or services have been sent or done and when the due date.
