Short answer: a purchase order is sent by the buyer to the seller before any work starts, to authorize a purchase. An invoice is sent by the seller to the buyer after delivery, to request payment.
One document opens the transaction. The other closes it. They travel in opposite directions, are created by different parties, and carry different legal weight — but they are designed to work together.
A purchase order (PO) is a formal, written document a buyer sends to a supplier to authorize the purchase of specific goods or services. Think of it as the buyer saying in writing: "We want this, at this price, by this date — please confirm."
According to Investopedia's definition of a purchase order, a PO is a commercial document issued by a buyer to a seller, indicating the type, quantity, and agreed price for goods or services.
What a purchase order typically includes:
Is a purchase order legally binding?
A PO starts as an offer — not yet a contract. Once the seller accepts it (by signing, sending a confirmation, or simply shipping the goods), it becomes a legally binding agreement under the Uniform Commercial Code (UCC), which governs commercial sales of goods in most US states. Until acceptance, either party can modify or cancel without penalty.
An invoice is a payment request sent by the seller to the buyer after goods or services have been delivered. It says: "Here is what we provided, here is what you owe, and here is when it is due."
For a full breakdown of invoices — what goes on them, types, and common mistakes — see what is an invoice: a beginner's guide.
What an invoice typically includes:
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Most B2B transactions follow this sequence:
Example — a small print shop: A marketing agency needs 500 branded folders. Their office manager creates PO #4021 authorizing the purchase from a local print shop for $750, delivery by June 20. The print shop receives the PO, produces the folders, and delivers them. On delivery, the print shop sends Invoice #INV-2087 for $750, referencing PO #4021, due Net 15. The agency's accounts payable team matches the invoice to PO #4021, confirms delivery, and schedules payment.
Example — a freelance copywriter: A freelance writer lands a contract with a mid-size company to produce four blog posts per month. Before the first post is written, the company's procurement team emails PO #8899 authorizing 4 posts at $200 each ($800/month). The writer delivers the posts, then invoices at month-end with Invoice #22, listing four line items and referencing PO #8899. Without that PO number, the client's finance team may delay or reject the invoice.
| Purchase Order | Invoice | |
|---|---|---|
| Who creates it | The buyer | The seller |
| When it is sent | Before delivery — to authorize the purchase | After delivery — to request payment |
| Direction | Buyer → Seller | Seller → Buyer |
| Primary purpose | Approve and define the purchase | Bill for work completed |
| Legally binding? | Becomes binding when the seller accepts it | Binding payment obligation once issued and received |
| Contains | PO number, items ordered, agreed price, delivery date | Invoice number, PO number reference, items delivered, amount due, payment terms |
| Sits in accounting as | Buyer's committed spend (accounts payable forecast) | Seller's accounts receivable; buyer's accounts payable |
When a corporate buyer issues a PO, they expect to see that PO number on every invoice you send for that job. This is not optional — it is how their accounts payable team processes payment.
The reason is a process called three-way matching: before approving payment, the buyer's AP team compares three documents:
All three must agree on item, quantity, and price. If your invoice does not reference the PO number, it cannot be matched and will sit in a queue — or get kicked back to you.
Practical tip: When a client sends you a PO, save it and put the PO number in a clearly labeled field on your invoice before you send it. Most invoice templates have a dedicated "PO Number" or "Reference" field for exactly this reason. If you need a template with that field built in, check the invoice template for Google Docs.
For more on invoice numbers and how to structure them, see what is an invoice number.
Solo freelancers doing one-off work for individuals rarely deal with POs. But they appear more often than you might expect:
Invoicing without referencing the PO number. If your client issued a PO, always put the PO number on your invoice. Omitting it is the single most common reason invoices stall in corporate AP queues.
Treating the PO as payment. A purchase order is authorization to proceed — it is not a guarantee of payment and it is not a substitute for an invoice. You still need to send an invoice to trigger the payment process.
Mismatching quantities or prices. If your invoice shows a different quantity or unit price than the PO, it will fail the three-way match and get flagged. Before you send the invoice, confirm that the line items match what the PO authorized.
Issuing an invoice before delivering. An invoice is a request for work already done. Sending one before delivery creates confusion and may violate the client's procurement rules.
Creating a PO yourself when the client should. The buyer creates the PO — not the seller. If a client says "just send us an invoice," that usually means no PO is required. Don't send them a document labeled "purchase order"; that is their role in the workflow.
For a related comparison, see invoice vs bill for how the same document looks from the buyer's perspective once they receive it.
Whether you are the buyer or seller, keeping purchase orders and invoices together is good practice — and important at tax time. The IRS guidance on recordkeeping for small businesses recommends keeping records that support your income, deductions, and credits. A matched set of PO + invoice + payment record is the cleanest proof of a business transaction if you are ever audited.
This is general information, not tax or legal advice. Consult a qualified professional for guidance specific to your situation.
What is the main difference between a purchase order and an invoice?
The buyer creates a purchase order before delivery to authorize the purchase. The seller creates an invoice after delivery to request payment. A PO initiates the transaction; an invoice closes it.
Is a purchase order legally binding?
Once the seller accepts the PO — by signing it, sending a confirmation, or simply fulfilling the order — it becomes a binding contract under the UCC (for goods) or general contract law (for services). Until acceptance, it is only an offer.
Does a purchase order replace an invoice?
No. They serve opposite functions and travel in opposite directions. The buyer sends the PO to start the job; the seller sends the invoice to get paid. Both are needed to complete the full transaction cycle.
Do freelancers need purchase orders?
Not for every job. Freelancers working with individuals or small businesses often skip POs entirely. But when working with corporations, government agencies, or any organization that has a formal procurement process, expect a PO — and expect to reference it on your invoice.
What is the PO number on an invoice?
When a buyer issues a purchase order, it carries a unique PO number. The seller includes that number on their invoice so the buyer's accounts payable team can match the invoice to the original approved PO before releasing payment.
Can I send an invoice without a purchase order?
Yes — especially for freelance, small-business, and consumer-facing work. A purchase order is most common in B2B and corporate procurement. If no PO was issued, simply invoice normally. If you are unsure, ask your contact whether their company requires a PO before you start work.