While not always a legally binding contract, purchase orders and invoices are a critical part of the procurement process for both small and large trade contractors. Step 5: The vendor supplies the order, and then, to request payment, issues an invoice or bill that details the final amount owed by the buyer and the payment terms (a timeline for when they need to pay in full). Step 4: The purchase order is sent by the buyer to the vendor as an official request enabling the vendor to procure the materials. Step 3: A purchase order is developed by the buyer that details what type of pump and materials are needed, how many are needed, shipment info, and agreed upon price. Step 2: A supplier or vendor is identified who can supply the materials for x amount. Step 1: A resourcing need is identified by the buyer (hydraulic pump and additional parts/materials). An overview of a typical PO to invoice life cycle might look something like this: If while working on a project it is discovered that work has halted because a new hydraulic pump and various other materials are needed. To better understand the relationship between the two, let’s look at an example. While the invoice is a request for the final amount owed and helps bring the transaction to a close. The PO will initiate the transaction and will help manage project budgets and progress. Invoices will also include an itemized list and terms of the transaction. An invoice is sent by a vendor, typically after goods and services are provided, and details the final delivery date and amount that the buyer owes. ![]() ![]() an invoice is who is sending it, and when they send it.Ī purchase order (PO) is sent by a buyer to a vendor that serves as an official request to buy x product for x amount. The key distinction between a purchase order vs. Although similar, each serves a very different purpose in the purchasing process, as well as in the buyer-seller relationship. Yet they are often confused and misunderstood. Purchase orders and invoices are two critical documents used in the construction industry.
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