From Purchase Orders to Receipts: A Clear Guide to Finance Documents

June 11, 2025
8:46 pm

7 min read

Any company that regularly buys goods or services deals with various finance documents—especially purchase orders and invoices. While they might seem interchangeable, they serve distinct roles in the procurement and payment process.

Many business owners mistakenly treat purchase orders and invoices as the same, but each comes into play at a different stage of the vendor transaction. Understanding the difference between the two can go a long way in helping you manage purchases, track orders, and ensure timely payments.

Vendor-related payments are a key responsibility for any accounting team. Gaining clarity on how invoice processing works can improve accuracy, reduce delays, and keep your financial operations running smoothly.

What is a Purchase Order (PO)?

A purchase order, or PO, is a document created by the buyer and sent to a supplier when placing an order. Think of it as the buyer’s way of saying, “Here’s exactly what we need, and here’s what we’ve agreed to.”

It includes important details like item names, quantities, pricing, and delivery expectations. Once the vendor approves the PO, it becomes a formal agreement—essentially locking in the terms of the purchase.

A PO removes ambiguity from the transaction and gives both parties a clear record to refer to, making it a foundational part of organized procurement.

Why Should Companies Use a Purchase Order?

Using purchase orders offers businesses more than just formality—it brings structure, clarity, and control to the procurement process. Here’s why they’re essential:

Set Clear Expectations for Vendors
A PO spells out exactly what’s being ordered—products, quantities, and costs—so suppliers know what to deliver without endless calls or email threads.

Acts as a Single Source of Truth Across Teams
With multiple departments—like procurement, finance, and accounting—involved in payment workflows, a PO provides a consistent reference point for everyone.

Supports Clean Audit Trails
Since POs serve as evidence of authorized spending, they’re incredibly useful during audits, helping teams validate expenses with minimal effort.

Offers Legal Safeguards
In cases where no contract exists, a purchase order acts as a legally binding agreement that protects both the buyer and supplier from potential disputes.

Informs Better Budgeting Decisions
Since POs reflect committed spend before money is actually paid out, they help finance teams forecast expenses and keep overspending in check.

Purchase Order Process: How It Works

The purchase order process begins with the buyer’s procurement team identifying the need for goods or services. They initiate a formal request by creating a purchase order that outlines the specifics—such as item names, quantities, product codes, and pricing.

Today, most companies use Expense management software to generate POs automatically. The system allows teams to fill in the required fields and generate a structured, professional document. Some organizations still use standardized templates, which are customized and shared as PDFs.

Once the PO is reviewed and approved internally, it’s officially sent to the supplier. At this point, it becomes a formal request that kicks off the purchasing process.

Advantages of Using Purchase Orders

Simplifies Invoice Matching and Payment Tracking
Purchase orders serve as a reliable reference when verifying supplier invoices and ensuring that payments align with what was originally agreed upon.

Prevents Unexpected Costs
Since prices and terms are finalized before the supplier bills you, there’s minimal risk of surprise charges or price hikes after the fact.

Reduces Errors in Order Fulfillment
With everything clearly documented upfront, suppliers can fulfill your order with precision—minimizing the chances of wrong deliveries, returns, or disputes.

Improves Spend Visibility and Budget Control
POs provide insights into current commitments, helping businesses track spending patterns, manage vendor relationships, and stick to budget limits.

Speeds Up Delivery Timelines
Clear documentation streamlines communication and approval, enabling vendors to process and ship orders faster.

Drawbacks of Using Purchase Orders

Adds Extra Steps to the Buying Process
Creating a purchase order requires the buyer to initiate and prepare formal documentation, which can feel like an added task—especially for teams with limited bandwidth.

May Feel Cumbersome for Small Transactions
For smaller businesses or low-volume orders, generating a PO might seem like overkill, making the process more time-consuming than necessary.

What is an Invoice?

An invoice is a billing document issued by a supplier to request payment from the buyer after goods or services have been delivered. It marks the official start of the payment cycle in vendor transactions.

Although invoices often resemble purchase orders in format, they serve a different purpose. An invoice typically includes the supplier’s and buyer’s contact details, payment terms, itemized lists of delivered goods or services, applicable discounts, and the total amount due.

Once received, the buyer’s accounting team reviews the invoice against the corresponding PO to confirm accuracy before processing the payment.

While not every business uses purchase orders, invoices are almost always required to close out transactions and complete vendor payments.

Why Should Companies Use Invoices?

Invoices play a vital role in the financial operations of any business. Whether you’re handling incoming bills or sending out charges, invoices create a structured and trackable system for managing transactions.

Here are several reasons why invoices are essential for businesses of all sizes:

Simplifies Customer Billing
An invoice is the most straightforward way to request and collect payments from clients or customers after goods or services have been delivered.

Provides a Clear Breakdown of Charges
With detailed line items, taxes, and discounts included, invoices clearly communicate what the buyer is being charged for—eliminating confusion.

Outlines Payment Deadlines
Each invoice includes due dates and any applicable grace periods, helping both parties stay on top of payment schedules.

Tracks Spending Over Time
Invoices serve as financial records that help companies monitor where money is going, making expense tracking easier and more accurate.

Highlights Cost Trends
Reviewing past invoices can help identify which products or services are driving up costs, supporting smarter procurement decisions.

Supports Cash Flow Planning
By knowing how much money is expected or owed, businesses can plan their cash flow more effectively and avoid liquidity issues.

Establishes a Legal Record of Payment
Like purchase orders, invoices act as formal proof of financial transactions and can be used to resolve disputes or meet compliance requirements.

Useful During Audits
Invoices create a verifiable trail of expenses and income that helps streamline financial audits and internal reviews.

Invoice Processing Steps

Invoice processing is a multi-step procedure that often involves coordination between various teams within an organization:

Upon receipt of an invoice from the vendor, the accounts payable (AP) team takes ownership of the document.

The first task is to thoroughly review the invoice and cross-check it against the corresponding purchase order to ensure consistency.

Key details verified include the invoice date, PO reference number, description and quantity of items, unit prices, and vendor information.

If all information matches and is accurate, the invoice is either manually entered the accounting system or uploaded into automated payment software.

The invoice then moves through the necessary approval workflows. Once all required authorizations are secured, the payment to the vendor is scheduled and executed.

Advantages of Using Invoices

>Streamlines Payment Collection and Tracking
Invoices simplify the billing process by allowing vendors to efficiently request payments, while buyers can easily monitor and document those transactions.

>Projects a Professional Image
An invoice that incorporates your company’s branding, clear layout, and detailed information helps establish credibility and fosters trust with clients and suppliers.

>Enhances Financial Clarity
By clearly outlining amounts due and expected, invoices assist both the accounts payable and receivable teams in maintaining accurate and organized financial records.

>Provides Legal Documentation
Even without formal contracts, invoices act as official records of sales and payment terms, offering legal protection when needed.

Drawbacks of Using Invoices

Can Be Burdensome for Small Transactions
For minor or infrequent orders, managing invoices may feel like extra paperwork and effort that slows down the process.

Susceptible to Errors Causing Disputes
Even a simple mistake, such as a typo or incorrect amount, on an invoice can lead to confusion and disagreements between buyer and seller.

Timely Submission is Crucial
If the supplier delays sending the invoice after fulfilling an order, it can result in postponed payments and cash flow interruptions.

Environmental and Time Costs of Paper Invoices
Traditional paper invoices not only require more time to prepare and mail but also contribute to environmental waste compared to digital alternatives.

What is a Bill?

A bill is the record created and entered by the accounts payable team when they receive an invoice from a supplier. It captures the details of the amount the buyer owes the vendor.

While a bill includes similar information to an invoice—such as the total payment due—it serves as the buyer’s official acknowledgment of the transaction and a reminder of the outstanding payment.

Simply put, the invoice is the document sent by the seller, and the bill is the corresponding record logged by the buyer for that purchase.

What is a Receipt?

A receipt is a confirmation document issued by the vendor after the buyer has completed the payment. It acts as official proof that the transaction has been settled.

Buyers often keep receipts for their records, as they serve as evidence of payment and are useful for accounting and auditing purposes.

While both invoices and receipts come from the seller, they serve different functions: an invoice requests payment, whereas a receipt confirms that payment has been received.

How to Use Bills and Receipts for Smooth Vendor Order Payments

Automating the vendor bill payment workflow can significantly reduce the time spent on invoice handling and help prevent mistakes or incorrect payments.

Regardless of whether you use automation tools, understanding how invoices are converted into bills and how receipts serve as payment confirmations is crucial for effective vendor management.

Here’s an overview of how these documents fit into the invoice-to-payment cycle:

After placing an order with a vendor, you will receive an invoice outlining the requested goods or services.

The invoice is then matched manually—either by coordinating with the purchasing team or referencing the original purchase order—to ensure accuracy.

Once verified, your accounting staff enters the invoice details into the ERP system, which officially converts the invoice into a bill by associating it with the vendor’s account.

This bill, often accompanied by relevant notes or remarks, is forwarded to one or more approvers who review it before the payment due date.

Based on their feedback—whether approval or rejection—the bill either proceeds to the payment stage or is put on hold for further review.

If the bill is approved, payment to the vendor is processed through the company’s payment platform or financial system.

What Happens When Your Vendor Sends an Invoice:

Your accounts payable (AP) team receives the invoice and cross-checks the information with the purchasing department to ensure accuracy.

They compare the invoice details against the original purchase order to confirm everything matches.

If any discrepancies arise, the payment process is paused, and the vendor is informed of the issue.

The AP team then inputs the invoice data into the Expense Tracker 365 bill payment system, selecting the vendor, amount due, and other relevant payment details such as department codes and team assignments.

For existing vendors, the system generates a bill reflecting the payable amount.

For new vendors, the account must first be created before generating a bill.

Once the bill is logged, it is sent to the designated approvers for review.

After receiving the necessary approvals, the bill waits in the payment queue until its scheduled payment date.

If any approver rejects the bill, the payment process is halted immediately.

With all approvals in place, the payment is released according to the planned schedule.

You can monitor the status of each bill anytime within Expense Tracker 365.

Once payment is completed, you’ll receive a push notification confirming the transaction.

The vendor receipt can be downloaded directly by accessing the bill record.

Post-payment, you have the option to sync the expense details seamlessly with your other accounting tools integrated within Expense Tracker 365.

This smooth integration eliminates the need for employees to manually enter expenses into multiple platforms, streamlining your accounting workflow.

Conclusion

Managing the entire vendor payment journey—from issuing purchase orders to receiving invoices and handling receipts—can be complex and time-consuming. However, with the right tools, this process becomes smooth, transparent, and error-free. Expense Tracker 365 offers a comprehensive solution that automates and streamlines every stage of expense management, ensuring accuracy and efficiency.

By integrating purchase orders, bills, payments, and receipts in one platform, Expense Tracker 365 eliminates manual data entry, reduces errors, and accelerates approval workflows. Its real-time tracking and seamless accounting integration empower businesses to maintain better control over their finances and cash flow.

Choose Expense Tracker 365 to simplify your vendor payments, save valuable time, and gain complete visibility over your expense processes—making it the best choice for businesses aiming for smarter financial management.