Purchase order vs invoice: what each is and why the PO number matters

A purchase order (PO) is a document a buyer sends to a seller to order goods or services. It usually states what is being bought, the quantity, the agreed price, the delivery date and the payment terms, and it carries a PO number.

For the buyer, it also shows the spend was approved internally.

An invoice is a document the seller sends to the buyer asking for payment. It lists what was supplied, the amount due, the due date and how to pay, and it carries its own invoice number.

Where the customer issued a PO, the invoice should quote that PO number, so their AP team can link the bill to the order they approved.

For a customer that uses purchase orders, the usual flow is:

1. Purchase order. The buyer raises a PO, it is approved internally, and it is sent to you.
2. Delivery or receipt. You deliver the goods or complete the work. The buyer records that it was received, often in a goods receipt or a sign-off.
3. Invoice. You send an invoice quoting the PO number.
4. Three-way match. The buyer's AP team compares the PO, the receipt and the invoice. If the items, quantities and prices agree, the invoice is approved for payment.
5. Payment. The invoice is paid on the agreed terms, often with a remittance advice listing what was paid.

Either way, the PO number is what lets their system find the order.

Without a matching PO number, the AP team cannot link your invoice to an approved order. What happens next depends on the customer:

• Rejected. The invoice is returned, sometimes automatically, with a note asking for a valid PO.
• Parked. It sits in a queue while someone tries to find the person who ordered the work. Nobody tells you.
• Held on a mismatch. The PO exists but the invoice does not agree with it, for example a higher price, an extra line or more hours than the PO covers.

The parked case is the costly one. The invoice ages and you only find out when you chase weeks later. If a customer goes quiet on a routine invoice, ask whether it is waiting on a PO.

Say an IT services firm invoices $9,600 for a migration. The customer issued PO 4471 for $8,000, and the extra $1,600 of work was agreed by email but never added to the PO. The AP team holds the invoice on a price mismatch. The fix is to ask the customer to amend the PO, or to split the invoice into the $8,000 covered by PO 4471 and $1,600 under a new PO.

To pass a match first time:

• The PO number, exactly as issued, including any prefix
• Line items described the way the PO describes them
• Quantities and unit prices that agree with the PO
• The billing address and entity on the PO, which may differ from the site you worked at
• Your invoice number, invoice date, due date and payment terms

If the work changed from what the PO says, get the PO updated before you invoice.

Subject: Corrected invoice [Invoice number] - PO [PO number]

Hi [Customer name],

Thanks for letting us know invoice [Invoice number] was held because it did not match PO [PO number].

[Choose one:]
- We have reissued it with the correct PO number. The corrected invoice is attached.
- The invoice is [Amount] and the PO covers [PO amount]. The difference is for [Extra work], agreed on [Date]. Could you update the PO, or send a new PO for [Difference], so we can invoice it separately?

The due date stays at [Due date], based on the original invoice date. Could you confirm once it is in your system for payment?

Thanks,
[Your name]
[Your company]

If the original invoice has to be cancelled and replaced, issue a credit memo against it rather than editing it, so both sides' records stay clean.