One of the main objectives associated with the financial management of your business is to ensure that customers and clients receive timely invoices for products and services they purchase. Depending on your accounting method, you can use purchases orders, sales receipts and invoices to request, receive and record payments for products and services.
A purchase order is completed by a buyer and is sent to a seller to request the purchase of products or services. The buyer uses the purchase order to specify the number of items, types of service and prices associated with the purchase. A purchase order is a contract that obligates the buyer to compensate the seller for products and services listed on the document once the seller provides them. The buyer initiates the transaction by issuing the purchase order.
A sales receipt is a document that shows proof of payment once a buyer purchases goods and services from a seller and compensates him for those purchases. Unlike a purchase order, a sales receipt is not issued for future intended purchases but is issued only when a buyer provides payment for goods and services. A sales receipt is always issued from the seller to the buyer at the time of payment.
An invoice is a bill that details goods and services that have been or will be purchased by a buyer. An invoice is similar to a purchase order, but it is initiated by the seller and is issued to the buyer. A customer invoice describes the price, quantity and details associated with the transaction. When a buyer receives the invoice, he makes a contractual agreement to pay for products and services he purchased from the seller.
Due to human error, problems with purchase orders, sales receipts and invoices can occur. With each form of documentation, it is possible to correct, negotiate and amend the details. If there is an error, a seller can contact the buyer, or vice versa, to discuss the discrepancies and issue revised documents. Purchase orders, sales receipts and invoices are all treated the same when it comes to making corrections.