Differences Between Purchase Order and Tax Invoice

In this article, we will discuss in detail the difference between a purchase order and a tax invoice.

It is vital that every business maintains a proper documentation system since any delay can lead to fines and penalties. Having a repository of documents will allow them to retrieve any document whenever needed.

What is a Purchase Order?

The buyer uses a purchase order (PO) to place an order stating the goods required, the delivery date, the price, and other details. Purchase Orders become legally binding documents when the seller accepts them. They specify the type and cost of goods, the delivery date and terms of payment.

Benefits of issuing Purchase Orders:

  • Purchase orders specify the purchaser’s needs and thus set clear expectations for the vendor.
  • Once a Purchase order is created, a purchaser can look into its budget and spend wisely.
  • A Purchase order, once accepted by the seller, becomes a legally binding document. It gives legal protection.
  • Purchase orders also form part of audit trails.

What is a Tax Invoice?

The seller of goods sold creates an invoice. It details the type of goods sold, the amount due from the buyer, and the date the payment is due.

Benefits of issuing invoices:

  • Sellers collect money through invoices. This document requests payment from the buyer for the goods sold.
  • Financial reporting and legal documentation are both provided by it.
  • The audit trail includes invoices as well as Purchase Orders.
  • In addition to generating financial reports, it helps forecast future cash flows.

If you need to know more about Tax invoices, read the article.

Difference between Purchase Orders and Tax Invoices

We have prepared the following table for you to better understand the specific differences between a purchase order and a tax invoice.