Purchase order or quote: what is the difference and which do you need?

You send a quote to a company or a public body. A few days later, instead of a signed quote, you receive a "purchase order" with a number, terms in small print, and sometimes slightly different amounts. The quote and the purchase order come from opposite sides, and fitting them together properly stops your invoices getting stuck in the client's accounts department.

Who issues what

The quote is issued by you, the supplier. It describes what you propose to do and at what price. Once accepted and signed, it binds both sides.

The purchase order is issued by the client. It confirms what they are buying, at what price and on what terms. In larger companies and public bodies, it is often the only way spending can be committed: procurement issues it, with a number, after internal approval.

The usual sequence

1. 1You send a quote.
2. 2The client approves it internally.
3. 3The client issues a purchase order matching the quote, with a PO number.
4. 4You do the work.
5. 5You issue an invoice showing the PO number.
6. 6The client matches invoice, purchase order and delivery, then pays.

For a private individual, steps 2 and 3 disappear: signing the quote is enough.

Check the purchase order

Before starting, compare the purchase order with your quote line by line:

• services: the same ones, in the same quantities;
• prices: identical unit prices and total;
• dates: compatible with your schedule;
• payment terms: the client's may be longer than yours;
• the client's terms of purchase: penalties, warranties, insurance they require.

Any difference, however small, should be settled before work begins. A short email is enough: "Your PO shows 12 units, my quote has 15. Could you confirm the quantity?"

The PO number on your invoice

This is what holds up the most payments. Many companies and public bodies will not pay an invoice without the purchase order number: their accounts team cannot match it to the committed spend. The invoice sits on hold, sometimes for weeks, and nobody tells you.

So put the PO number on the invoice, clearly visible. Everything else it must show is in our guide to what to put on an invoice.

When the purchase order differs from the quote

If you start work without saying anything, you may be taken to have accepted the purchase order's terms. Better to ask straight away.

Working with procurement teams

Large clients can feel slow, but they usually pay reliably once their process is followed. A few habits help:

• Ask early who approves the spend and whether a purchase order will be issued. It avoids starting work that is not yet authorised.
• Keep the PO number with the job from day one, so it is never missing when you invoice.
• Invoice exactly what the order says. If the job grew, get the order amended or a new order raised before invoicing the extra.
• Send invoices where the client asks: many companies use a dedicated accounts payable address or portal, not the email of the person who ordered.

Purchase orders and proformas

Some public buyers also ask for a proforma invoice before raising the purchase order, to commit the spending. How that document works is explained in our article on the proforma invoice.

Summary

Payment terms with business clients are covered in our article on invoice payment terms.