TL;DR

A purchase order (PO) is a buyer's authorization to make a purchase. It comes before the work starts and protects both sides — the buyer controls spending and the seller has documented authorization to proceed.

Key Points

✓

Purchase orders are created by the buyer; invoices are created by the seller

✓

POs help larger organizations control budgets by requiring internal approval before any expenditure

✓

Referencing a PO number on your invoice speeds up the client's payment process significantly

✓

A PO combined with a matching invoice and receipt creates a three-way match used in corporate accounts payable

Purchase Order vs. Invoice

A purchase order and an Invoice travel in opposite directions. The buyer creates and issues the PO to the seller — it's a commitment to pay for specified goods or services. The seller creates and issues the invoice to the buyer after delivering those goods or services. Both documents should reference the same PO number so payment can be matched and processed efficiently¹. When a client sends you a PO before a project begins, always include that PO number on your subsequent invoice to avoid delays in their Accounts Payable department.

When Clients Use Purchase Orders

Larger companies, government agencies, and institutions typically require POs for any expenditure above a threshold amount. This gives their procurement and finance teams visibility into future spending before it happens. As a freelancer or small business, you may be asked to reference a PO number when invoicing these clients. Some buyers will not process an Invoice for payment unless it contains a valid PO number that matches their records — so always confirm the PO number with your contact before sending a final bill.

Creating a Simple PO Workflow

For smaller businesses, a simple PO workflow avoids surprises: when a client engages you, ask if they have an internal PO process. If they do, request the PO number and confirm the scope matches your Statement of Work or proposal. Document the PO number in your own records and include it prominently on your Invoice. If a client's actual order changes — common in consulting — get an updated PO before completing extra work so you have documented authorization to bill for the additional scope.

References

FreshBooks — What Is a PO Number for Invoices? Purchase Order Explained ↗

freshbooks.com

FreshBooks — What Is an Invoice? Types, Examples, and What to Include ↗

freshbooks.com

Last updated: June 9, 2026

Related Terms

Invoice

A document issued by a seller to a buyer that lists goods or services provided, their quantities, and the amount owed as payment.

Invoice Number

A unique identifier assigned to each invoice that makes it easy to track, reference, and reconcile payments between a business and its clients.

Accounts Payable

Money a business owes to its vendors, suppliers, or contractors for goods and services received but not yet paid for.

Statement of Work

A formal document that defines the specific services, deliverables, timeline, and scope of a project or engagement between a service provider and a client.

Put it into practice

Create professional invoices in seconds with LiteBill — free forever, no account required. Apply these concepts to your real billing workflow today.

Try LiteBill Free

← Previous in Invoicing Basics

Pro Forma Invoice

Next in Invoicing Basics →

Receipt