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Difference between PO and non-PO invoice (9) | Saldoinvoice.com

Difference Between PO and Non-PO Invoice

Business document flow consists of a variety of papers. The most important for self-employed and independent suppliers are invoices. However, some inexperienced entrepreneurs often confuse them with purchase orders (PO), which is fundamentally wrong. The latter are pre-order forms that a buyer fills out and hands over to a seller. That is, they precede the provision of goods and services and, accordingly, the issuance of bills. Depending on whether you received a PO for an invoice from a client or not, the document processing is slightly different. Let’s consider all the nuances in more detail.

What is Invoice Processing?

Meaning behind invoicing procedures. How to process an invoice and the steps you need to take to sort it all out.

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What Is a PO Invoice?

Download Service Purchase Order Template FreeAs you understood from the introduction, purchase order and invoice processing go precisely in this sequence. First, you get a preliminary list of products that a customer would like to order, provide them with everything they need, and, based on it, issue a bill demanding compensation for the work performed. With this sequence, you should make an invoice, considering the data specified in the PO.

What does a PO mean in a business? While purchase orders are not required forms, they do have certain benefits for your business and clients. They provide maximum accuracy, allowing you to manage inventory and budget more efficiently. You know what an orderer wants and can quickly assess whether you meet their requirements. With the information provided in POs, you can also optimize the packaging and delivery of goods. Moreover, this type of paper simplifies PO invoice processing since you already have all the necessary data. Purchase order template word is a solution that helps businesses streamline their procedures with amazing ease and speed.

What does a PO number mean on an invoice? It serves as a link between two documents. Thus, all papers generated and the data in them (including delivery info) will converge in accounting records. If we talk about compensation for work performed, PO payment terms should also be prescribed. However, it doesn’t mean you should expect to get money after receiving a purchase order. Payment always follows after the provision of goods, services, and invoices.

Non-PO Invoice Meaning

The non-purchase order definition implies a bill issued without a pre-provided PO. Items pre-ordering is optional, and some companies skip this step. Typically, it happens in businesses that provide services at an hourly rate. As a basis for creating such an invoice for payment, you take a contract and an invoice template printable. The form should include all information about the tasks performed, contact data of a customer and contractor, and payment terms and methods.

Why are invoices important for a business?

Let’s take a closer look at the importance. How to invoice for hours worked.

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PO and Non-PO Invoice Processing Steps

Non-PO and PO bills practically don’t differ in their content; the key fields remain the same. However, there is a difference in processing these types of documents. The presence of a PO means that a company or buyer has read your terms and conditions, agreed with them, and is ready to place an order. That is, a client approved a PO. Some view purchase orders as pre-approved invoices. After receiving the bill itself, customers pay within the agreed time.

In the case of non-PO bills, they still have to go through an approval process within the buying company. As soon as the accounting department makes sure that everything is in order, the invoice is transferred further for booking and the compensation for the services and products offered. In the case of large-scale and multi-stage projects, it’s fraught with errors and extra checks, which in turn delays the receipt of payment to your account. If you want to receive money for your work on time, it’s recommended to ask for purchase orders. Fortunately, modern business solutions like SaldoInvoice allow you to reduce all inaccuracies to a minimum.

PO and Non PO Invoice Difference
PO associated with invoice raisedNon - PO associated with invoice raised
Used for Direct Purchase Used for Indirect Purchase
Faster Invoice Processing Slower Invoice Processing
Used for normal procurement Emergency procurement of goods or services
Differences between PO and Non-PO accounts As we delve into the specifics, it becomes evident that understanding the differences between PO and Non-PO accounts greatly enhances your ability to manage business workflows. The structure and components of each account type are one key distinction. A PO invoice corresponds to a purchase order and generally includes detailed product or service descriptions, the agreed prices, delivery terms, and the specific PO number for reconciliation. On the other hand, a non-PO invoice might lack such a detailed breakdown, particularly if services are billed at an hourly rate, with a simplified description of tasks performed. The approval and payment process for each type of invoice also vary. With a PO invoice, there is a sense of streamlining the payment process. The purchase order represents pre-approved terms, which speeds up payment as there’s already a mutual understanding of the transaction’s parameters. However, with non-PO invoices, additional checks and challenges can occur within the managing processes of the buyer’s accounting department, potentially slowing down payment.

How to choose the right type of account

Navigating the choice between PO and Non-PO accounts requires a keen understanding of their purpose and usage. PO invoices might be more suitable for direct, regular procurement. It offers faster payment due to its pre-approved nature and can aid in tracking and reconciliation processes. Therefore, when you have the opportunity to negotiate with the client for the use of purchase orders, it is advisable to do so. Non-PO invoices, on the other hand, offer flexibility for indirect purchases or in cases where emergency procurement of goods or services is required. This might often be the case in projects that involve varying hourly work or in situations where a PO is not feasible or necessary. Here are some best practices for choosing the right type of account:
  1. Assess the nature of your business and the kind of transactions typically performed.
  2. Consider the impact on your inventory management and budgeting.
  3. Evaluate the potential for streamlining workflows and reducing inaccuracies.
  4. Weigh up the potential challenges in managing processes.
  5. Prioritize negotiating with the client or partner to select the right account type.
Thus, whether you decide on using a PO or a Non-PO invoice largely depends on your specific business context. Both have their unique benefits, and the key is to find a balance that suits your operations and promotes efficient payment procedures.
  • What distinguishes a PO from a non-PO invoice?

    A non-PO invoice is one that is created for a purchase made without a purchase order, whereas a PO invoice is one that is prepared for a purchase order issued by a client.
  • What comprises a PO invoice's essential components?

    The purchase order number, the description of the products or services ordered, the quantity, the unit price, the total amount, and any relevant taxes are the main components of a PO invoice.
  • Why is it crucial to distinguish between PO-compliant and non-compliant invoices?

    It's crucial to distinguish between PO and non-PO invoices for accurate financial tracking and accounting. While non-PO invoices provide for the tracking of expenditures incurred outside of the purchase order procedure, PO invoices assist in ensuring that purchases are properly approved and budgeted.
  • How are invoices for POs and non-POs handled differently?

    While non-PO invoices may be processed either directly by the buying department or through an accounts payable department, PO invoices are normally processed through the accounts payable department of a company.
Radomir Novkovich
Radomir Novkovich
Co-founder of Saldo Apps. His core competencies include product management, mobile app marketing, financial advertising, and app store optimization.
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