Accounting & Bookkeeping

What's the difference between a PO, an invoice, and a sales receipt?

What is the difference between a PO and an Invoice?

The main difference between a purchase order (PO) and an invoice is that a purchase order is generated by the buyer, while an invoice is generated by the seller. A PO confirms that a customer or client is placing an order. The invoice or bill is how you request payment for the order. Not all customers will issue a PO, but if they do, they’ll usually want you to reference their PO number on your invoice to help them keep track of the sale in their own accounts payable system. POs can also help you keep track of the orders you have and still need to fulfill.

Once an order has been filled, you should send your customer an invoice or bill that includes the PO number in the description. You should also make sure to include payment terms, including how you prefer to be paid.

Invoice Template

Click the button to copy our template to your Google Drive.

What is a sales receipt?

A sales receipt is the customer's proof that a purchase was made and it acknowledges that the seller has been paid for goods or services. The receipt is always issued by the seller and given to the buyer. If you use an e-commerce site like Shopify or Squarespace or accounting software like Quickbooks, your receipts will probably be generated automatically upon payment.

What are payment terms?

Payment terms are the conditions under which you (the seller or vendor) expect to be paid. This includes:

  • When payment is expected

  • Any conditions on that payment

  • Any discounts the buyer will receive

Here are a few common payment terms that may be helpful to know:
  • PIA - Payment in advance

  • Net 10 - Payment ten days after invoice date

  • Net 30 - Payment 30 days after invoice date

  • Net 60 - Payment 60 days after invoice date

  • 1% 10 Net 30 - 1% discount if payment is received within ten days otherwise full payment is due 30 days after invoice date

  • EOM - End of month

  • COD - Cash on delivery

  • Cash account - Account conducted on a cash basis, no credit

  • Stage payment - Payment of agreed amounts at stage

As you can see, there are many different ways you can accept payment, and how you do so is up to you and your customers. For products, you’ll usually get paid at the time of the order. For services, you’ll usually get paid within a certain timeframe after you deliver your services, although it is not unusual to ask for a certain amount in advance, or to ask for stage payments. Whatever your terms, just make sure that they are clearly communicated to your customers as early as possible, and preferably in writing, to avoid any issues down the road.

How do I create and use an Invoice?

Our sales invoice template allows you to store basic information including customer name and address, shipping address, shipping costs, item description and quantity, total order amount and additional comments or details.

Invoices come in many different forms and businesses can design their template in a way that works for their specific business needs. To be useful, your invoices should contain specific information about the transaction. Other common components include:

  • Your business information: name, phone number, email address, and business address

  • Customer information: name, phone number, email address, billing and shipping address if needed

  • Important dates: include date the receipt/invoice is created and provide a due date if applicable

  • Invoice number

  • Product/service details: item name or identifier for each product or service, quantity of items purchased and cost per unit (sale price)

  • Taxes

  • Total amount of the sale: including all taxes, fees and shipping

  • Payment terms

Other information that should be included:

  • Company logos and other branding material

  • Information about return policy and/or discounts available

Once you create your invoice template, or modified the one we provided, you can begin giving your customers receipts after a purchase.

Why are invoices and receipts important?

Invoices and receipts act as official sales records for your business. It’s crucial that you keep them accurate because they will help you track of your sales numbers and the income generated. As a business, you’re also legally required to record your sales and the tax you charge your customers and the information you collect on your sales receipts will help you file and pay your taxes accurately.

Detailed receipts are also useful for your customers. They help them prove deductible expenses, track business costs, and record taxes paid. This can help them at tax time, as well. This is also convenient for any of your customers who need to establish the expenses they had in a given tax period.

Pro Tip

We recommend keeping digital copies of all your receipts to make it easier to file your taxes when the time comes. Storing a digital copy in a cloud-based service like Google Drive or Dropbox will also allow you to easily copy your business information and routine comments while keeping your data safe and virtually impossible to lose.