Whether you're freelancing in your pajamas or running a bustling small business, we know you're passionate about what you do. You're in the trenches, delivering fantastic services or products, lighting up your customers' days.
But then comes the paperwork. The invoicing, the order tracking, the financial records – it can seem like you're lost in a maze of numbers and details, right? And then, there are “PO number on invoices.” You might be wondering, what's that all about?
In this article, you’ll learn:
So, dive in and make your paperwork super easy!
A purchase Order number (or PO number) is a unique identifier for a specific transaction between a buyer and a seller.
Let's say you run a business dealing in wood for making furniture. A small business dealing in custom-made furniture needs wood in bulk from you to be able to make and sell furniture.
They agree on the price you’re selling it, note down what they want, and bam!
They generate a purchase order (A document that details the specifics of the order – what they want to order, how much they've agreed to pay, and other relevant details).
And to ensure this specific order can be tracked and identified, a unique PO number is assigned.
Here are some of the key reasons why you need to have a PO number for your orders:
You don't want to get caught in a situation where you're scratching your head trying to figure out the specifics of a past order, right?
Having a unique identifier for each order can easily help track and manage those orders.
PO numbers are also necessary for keeping your financial records straight. They make it easier to match up invoices and orders, which is super handy when you're doing your accounting.
There's less room for misunderstandings or errors when you have a clear paper trail (or digital trail, in today's world). The details of the transaction are all right there in the Purchase Order, tied to the unique PO number.
But hey, "Aren't purchase orders and invoices the same thing?" Well, they're similar in the way that both are used during the purchase process, but both have distinct roles and are used at different times.
A purchase order is a document created by the buyer or client. It outlines what they wish to purchase, its quantity, and the price. It’s like a formal, written version of saying, "I want to buy this from you, and I agree to your terms."
Here’s how a purchase order template looks.
An invoice is a document you issue your client after providing the service or delivering the product to your client. It's your way of saying, "Great doing business with you, now here's what you need to pay me."
Here’s how an invoice template looks. You can pick the one that suits your business and generate an invoice quickly.
Both PO numbers and invoice numbers are unique identifiers, much like serial numbers, but each serves a different purpose.
A PO number is tied to a specific purchase order. It helps both the buyer and seller track the order from placement to delivery to payment. Remember, the PO number is set by the buyer when they place an order.
An invoice number, meanwhile, is attached to the invoice. When you've provided your product or service, you'll generate an invoice with a unique invoice. This number helps you track which payments you've requested and received.
Okay, so we've talked about what is a PO number and why it's essential. But how does it tie in with invoices?
Here's the thing: When you invoice a client for an order they've placed, you should include the PO number on the invoice. Why? Well, it helps your client match your invoice to the corresponding purchase order on their end. This way, they can confirm that they're being billed for the right thing and quickly process your payment.
You might be wondering: Does every invoice need a PO number? The answer is – it depends. It's a standard practice among enterprises or large businesses to use PO numbers.
But for freelancers or very small businesses, it might not always be necessary. However, even if you don't strictly need to use them, PO numbers can be a useful tool to help you keep your business organized.
Creating a PO number system can be as simple or as complex as you want. The key is consistency. Here are 5 simple tips to get you started:
Your PO numbers could be a simple running tally (PO001, PO002, etc.), or they could include more information (like date, customer initials, etc.). Pick a format that suits your business needs.
Each PO number should be unique to avoid confusion. Never repeat a PO number, as that would make no sense at all for making it.
Developing a systematic way of generating and recording PO numbers can keep you organized. That system can be as simple as a spreadsheet or as sophisticated as an accounting software solution.
Once you've decided on a system, just stick with it. Changing systems can confuse and lead to errors.
Remember to always include the PO number on your invoice. It'll make life easier for both you and your client.
Where you place the PO number can vary, but it should always be easy for your client to find. A common location is at the top of the invoice, near the invoice number.
Alternatively, you might place it near the description of the goods or services you're billing for.
Remember: The goal is to help your client match your invoice with their purchase order. So, keep it in a clear, noticeable place, and always label it as 'PO number' or 'Purchase Order Number' so there's no confusion about what this number represents.
Use PO numbers to track your orders and payments. If an invoice hasn't been paid, check the corresponding PO number and follow up with the client.
By now, you’d have a clear idea about what is a purchase order, what is a PO number, and how you can use it effectively in your business.
While it might seem like a little extra work, trust us, using invoicing templates, and purchase order templates will make your transactions smoother, booked cleaner, and headaches fewer!
So, sign-up for a FREE 7-day trial and happy invoicing!
Revamp your agency's invoice creation process with our top 10 tips for improvement.
Dive into the world of agency operations with our expert guide. Discover essential steps to ensure success and common mistakes to avoid.
Write professional invoice emails to encourage fast payment for client projects and services. Free invoice email templates, tools, and tips from Bonsai.
