What Is a Purchase Order? PO vs Invoice Explained (+ Free Template)

A purchase order is the buyer's promise to pay

A purchase order (PO) is a document the buyer sends to the seller to formally request goods or services at an agreed price. It says, in effect: "I want these specific things, in these quantities, at this price, and here's the reference number to track it all."

That last detail matters more than people expect. The PO carries a unique number, and once the seller accepts it, the PO becomes a binding agreement. The seller fulfils the order, then sends an invoice that quotes the same PO number. The buyer's accounts team matches the invoice against the original PO, confirms the numbers line up, and releases payment.

So the direction of travel is the opposite of what most freelancers assume. You don't issue a purchase order to your client. Your client issues one to you. Your job is to reference it correctly on the invoice you send back.

Who actually uses purchase orders

POs are standard in any organisation big enough to separate the person who wants something from the person who pays for it. Procurement requests it, finance approves it, accounts pays it. The PO is the paper trail that links those steps.

You'll run into purchase orders when you work with:

• Mid-size and large companies
• Government departments and public bodies
• Universities, hospitals, and councils
• Anyone whose accounts payable team enforces a "no PO, no pay" policy

A "no PO, no pay" policy is exactly what it sounds like: if your invoice doesn't quote a valid purchase order number, it gets rejected automatically — often without anyone telling you why. This is one of the most common silent causes of late payment for freelancers landing their first corporate client. The work was approved, the relationship is fine, but the invoice is stuck in a queue because there's no PO reference for the system to match against.

If a new client is large, ask early: "Do you require a purchase order before I invoice, and if so, who raises it?" Get the number before you do the work, not after.

PO vs invoice: the core difference

Both documents list what's being bought and what it costs. The difference is who issues them, when, and what they commit you to.

A clean way to remember it: the purchase order opens the transaction; the invoice closes it. The PO says "please supply this," the invoice says "here's what I supplied — now pay me."

They're complementary, not competing. On a well-run job, the invoice is almost a mirror of the PO, plus a payment request. If your invoice quantities and prices don't match the PO, expect a query.

For how a PO sits alongside the other documents you'll handle, see invoice vs quote vs estimate and invoice vs receipt.

The purchase order process, step by step

Here's the full lifecycle on a typical B2B job, from the seller's point of view:

1. You send a quote. The client asks for pricing. You provide a written quote — say, £4,000 for a website redesign.
2. The client raises a PO internally. Someone in procurement converts your quote into a purchase order, gets it approved, and assigns it a number (e.g. PO-20418).
3. You receive the PO. It lists the agreed scope, price, and that number. This is your green light. Read it carefully — it should match your quote.
4. You do the work / deliver the goods.
5. You send an invoice quoting the PO number. The invoice references PO-20418 prominently.
6. The client three-way matches. Accounts payable checks the invoice against (a) the PO and (b) any goods-received or completion record. If all three agree, payment is approved.
7. Payment is released per the agreed payment terms.

Step 6 is why POs exist. "Three-way matching" — PO, delivery confirmation, and invoice — is the control that stops a company paying for things nobody ordered or never received.

What goes on a purchase order

If you ever do need to raise a PO (for example, you subcontract part of a job to another freelancer and want a clean paper trail), include:

• PO number — unique, sequential, easy to reference
• Date issued
• Buyer details — your business name, address, contact
• Supplier details — who you're buying from
• Line items — description, quantity, unit price, line total
• Subtotal, tax, and grand total
• Delivery date and delivery address
• Payment terms — e.g. Net 30
• Authorised by — name of the person approving

Sample PO line itemDescription: Custom WordPress theme developmentQty: 1 | Unit price: £4,000.00 | Line total: £4,000.00PO number: PO-20418 | Delivery by: 15 Jul 2026 | Terms: Net 30

Notice how closely this resembles an invoice line. The structure is deliberately the same so the two documents can be matched field by field.

How to invoice against a PO correctly

This is where freelancers lose time and money. Get these right and your invoices sail through:

• Quote the PO number at the top. Label it clearly: Purchase Order: PO-20418. Don't bury it in the body. Many AP systems scan for it.
• Match the description and amounts exactly. If the PO says "Website redesign — £4,000," don't invoice for "Web design services — £4,000." A mismatch can trigger a manual review.
• Don't exceed the PO value. If you billed more than the PO authorises, the overage usually won't be paid until a revised or supplementary PO is issued. If scope grew mid-project, ask for the PO to be amended before you invoice.
• One PO can cover several invoices. On a phased project, you might invoice 50% up front and 50% on delivery, both against the same PO. Make sure the combined total doesn't breach the PO amount.
• Use your own invoice number too. The PO number is the client's reference; your invoice number is yours. Both should appear.

If you're new to the mechanics of the invoice itself, how to write an invoice and how to send an invoice cover the essentials.

A note on tax

A purchase order is a commercial document, not a tax document. It doesn't satisfy VAT or sales-tax record-keeping requirements on its own — the invoice does. If you're VAT-registered, your invoice still needs all the usual VAT details regardless of what's on the PO (UK VAT invoices explained; US sales tax on invoices). Rules vary by jurisdiction, so confirm specifics with your tax authority or accountant.

Free purchase order template

Copy this into a document, a spreadsheet, or your invoicing tool. It works in Word, Google Docs, or Excel — see how to make an invoice in Excel, Word, or Google Docs for the same approach applied to invoices.

PURCHASE ORDER

PO Number: ________ Date: ________

Buyer: Your business name, address, email, phoneSupplier: Supplier name, address, contact

Description	Qty	Unit price	Total

Subtotal: ________ Tax (___%): ________ Total: ________

Delivery by: ________ Deliver to: ________ Payment terms: ________ (e.g. Net 30) Authorised by: ________ Signature: ________

Keep your PO numbers sequential and never reused — the same discipline that applies to invoice numbering.

When you don't need a PO at all

Plenty of freelance work never touches a purchase order. Sole traders billing other small businesses or individuals usually skip the whole process — a quote, a handshake, and an invoice do the job. POs add overhead, and for a £300 logo design they're more friction than they're worth.

Use a PO process when:

• The amounts are large enough to justify formal authorisation
• Your client's accounts team requires it
• You want a clear, pre-agreed record of scope before starting (protecting you in a dispute over payment)

For everyday freelance invoicing without POs, how to invoice as a freelancer and invoicing as a sole trader walk through the simpler flow.

Frequently asked questions

Does a purchase order count as a legally binding contract?

Once the seller accepts it, a PO generally creates a binding agreement to supply the listed goods or services at the stated price — it functions as an offer that becomes a contract on acceptance. The exact legal weight depends on your jurisdiction and the surrounding terms, so treat a high-value PO with the same care as any contract.

Can I send a purchase order to my client?

Usually no — the buyer issues the PO, and your client is the buyer, so the PO comes to you. You'd only raise one yourself when you're the buyer, such as when subcontracting work or purchasing supplies for a project.

What happens if my invoice doesn't match the PO?

It typically gets held for review or rejected. Mismatched descriptions, quantities, or amounts break the three-way matching that accounts payable relies on. Fix it by quoting the exact PO number, matching the wording and totals, and asking for the PO to be amended before you bill if the scope changed.

Do I need both a PO and an invoice?

When a client uses POs, yes — they serve different roles. The PO authorises the purchase before work starts; the invoice requests payment after delivery and references the PO. For clients who don't use POs, the invoice alone is enough.

Is a purchase order the same as a proforma invoice?

No. A PO is issued by the buyer to request goods; a proforma invoice is issued by the seller as a preliminary, non-final bill — often for quoting or customs purposes. See proforma invoice vs invoice for the distinction.