Invoicing should be simple: a vendor sends a bill, finance approves payment, the job is done. But every accounts payable (AP) team knows how easily mismatches, missing details and late approvals can disrupt the process.
For companies handling high volumes of supplier payments, the way invoices enter and move through approval determines how efficiently those payments are processed. PO-backed invoices can be checked automatically against agreed orders before payment, while non-PO invoices demand a defined approval path to avoid delays and risk.
Understanding the PO invoice meaning (what a PO invoice is and how it differs from a non-PO invoice) is key to streamlining approval workflows and avoiding delays, costly errors and audit issues.
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The difference between purchase order and invoice
A purchase order (PO) and an invoice often carry similar details. However, they serve opposite roles in a transaction.
- A purchase order (PO) is issued by the buyer to the supplier at the start of the process to initiate and authorise a purchase. It confirms what is being bought, at what price, under which terms.
- An invoice is issued by the supplier to the buyer after goods or services have been delivered to request payment in line with the agreed PO.
Think of the PO as the go-ahead for the purchase and the invoice as the request for payment once the agreement has been fulfilled.
PO invoice vs non-PO invoice (and why it matters)
Every invoice arriving in accounts payable falls into one of two streams, and the way it enters the system determines how quickly and accurately the invoice can be approved.
- PO invoices are backed by an approved purchase order. The supplier includes the PO number on the invoice, enabling automated two- or three-way matching between the PO, the invoice and a goods-received note (where relevant) before payment. This rules-based process means faster approvals, fewer exceptions and a clear audit trail.
- Non-PO invoices relate to spend outside the purchase order process — legitimate costs such as utilities, rent or ad-hoc expenses. With no pre-approved order to match against, each invoice must be routed for manual review and sign-off, which takes longer and carries a higher risk of errors or duplicate payments.
Both types of invoices — PO and non-PO — may include similar details, such as items, quantities and prices, but they follow different approval routes. The PO number anchors the order, receipt and invoice, supporting automated checks, accurate tracking and reliable auditing that non-purchase order invoices can’t offer.
Key benefits
When most supplier invoices are tied to a purchase order, finance teams benefit in several ways, including:
- Greater accuracy and financial control: Pre-approved spend and systematic matching reduces price or quantity errors, blocks duplicate invoices and lowers fraud risk.
- Faster processing: A clean purchase order invoice can move through touchless processing, meaning approvals happen quickly and payment cycles are shorter.
- Tighter compliance: Each approval and match is captured end-to-end. The PO number links the order, receipt and invoice, creating a clear, searchable record for internal reviews and external audits.
- Better supplier relationships: Predictable processing and fewer queries lead to smoother relationships, fewer disputes and more on-time payments.
While some non-PO spend will always be necessary, using POs wherever practical provides structured checks and traceability, keeping costs under control and payments on schedule.
How PO invoicing works, step-by-step
PO invoicing follows a structured path that keeps purchasing, approvals and payments aligned. Here’s how a typical workflow unfolds from start to finish:
- PO creation and approval
A purchase order is raised in the ERP or procurement system with details of the items, agreed prices and terms. It is reviewed and approved before being sent to the supplier.
- Goods or services received
The vendor delivers as agreed. A goods-received note (GRN) or service confirmation is recorded to acknowledge what was delivered.
- Supplier invoice received
The supplier submits an invoice, often by email, PDF or e-invoicing portal, referencing the invoice PO number.
- Data capture and validation
Invoice data is captured automatically using optical character recognition (OCR) or intelligent document processing (IDP) and is checked for completeness and formatting errors.
- Matching
The system performs a two-way or three-way match: invoice against PO, and — where goods are involved — against the GRN, contract and relevant tax records if required.
- Tolerance rules and exceptions
Pre-set tolerances automatically approve small variances, while larger discrepancies trigger an exception workflow for review.
- Approval, posting and payment
If exceptions exist, the invoice is routed for approval; otherwise it is posted to the ERP for payment according to the agreed terms.
- Archiving with audit trail
The final, approved invoice and all related documents are stored with a complete audit trail for compliance and retention.
This sequence provides end-to-end visibility and control across the entire purchasing and payment cycle, ensuring that what was ordered, received and billed matches before any payment is released.
PO vs non-PO: A quick comparison
PO and non-PO invoices share a common goal of paying suppliers accurately, but the way they’re processed is quite different. Here’s a side-by-side look at how the two invoice types differ in process, control and risk.
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Aspect
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PO invoice
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Non-PO invoice
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Pre-approval
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Approved upfront through the PO workflow
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No prior PO; requires a defined routing and approval path
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Matching
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Automated two- or three-way match to invoice PO and GRN
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Approved based on value and budget owner only
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Speed
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Often touchless if data is clean, allowing faster processing and payment
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Slower because each invoice needs manual checks
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Risk
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Lower, as policy and price controls are built into the PO
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Higher, as there’s a greater chance of maverick spend, errors or fraud
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Audit trail
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Strong; PO, GRN and invoice are all linked for complete visibility
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Must be enforced through workflow to ensure compliance
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In practice, a purchase order invoice should handle most structured spend where prices and quantities can be agreed in advance. A non-purchase order invoice is best reserved for limited categories where a purchase order isn’t practical.
Business benefits of PO invoicing
Beyond smoother internal operations, purchase order invoicing delivers measurable benefits for your business as a whole, including:
- Fewer errors and over-payments: Automatic checks catch mismatches before payment, cutting duplicate or inflated invoices and simplifying accounting reconciliation.
- Faster cycle times: Clean purchase order invoices can be processed in roughly a day in best-in-class operations. Even average performers see shorter approval and payment times than non-PO workflows.
- Stronger compliance and financial audit readiness: Every approval and match is logged within the system, creating full traceability for internal and external audits.
- Improved supplier satisfaction: Predictable, on-time payments mean fewer disputes and stronger vendor relationships.
From policy to pilot to rollout: How to start a PO invoicing programme
Launching a PO-based invoicing programme works best when rolled out step by step. A structured approach gives your finance and procurement teams time to set rules, prepare vendors and refine the workflow before scaling up.
These steps will help you move from strategic decisions to full adoption without disrupting day-to-day work:
- Define your PO invoicing policy
Decide which spend categories must be PO-backed and which can remain non-PO. Create limits and approvers so everyone knows when a purchase order is required.
- Set tolerances
Establish acceptable price and quantity thresholds. Small variances can be auto-approved, while larger ones trigger an exception workflow for review.
- Prepare data and suppliers
Make sure PO numbers are consistently included on invoices, and share clear guidance with suppliers about the new process.
- Integrate your ERP
Enable ERP integration to support PO and GRN lookups, automated posting, and real-time status updates for matching and reporting.
- Pilot the process
Start with a high-volume category or a key vendor. Track cycle time, exception rates and the percentage of invoices processed without manual intervention, aiming to raise the touchless rate and lower exceptions.
- Roll out in phases
Gradually expand to more categories and suppliers, refining tolerances and exception handling as you go.
This phased rollout builds confidence in your new invoicing process by providing measurable results at each stage, setting the foundation for consistent PO compliance across your organisation.
Real-world example: Glenkeir Whiskies
Glenkeir Whiskies, owner of The Whisky Shop chain, once relied on a paper-heavy purchasing process. At peak times the finance team handled 200–300 invoices a month, each requiring multiple paper documents and manual checks.
“Our purchasing process was long, arduous and involved lots of paper. We would have multiple pieces of paper linked to the same purchase and the accounts team would manually check the invoice line by line against the goods received,” recalls Glenkeir Whiskies’ finance manager, Joe O’Raw.
Every purchase order was printed, matched with client acknowledgements and goods-received notes, and then re-keyed into Sage 200. Printing, scanning and manual verification slowed approvals and added cost.
DocuWare replaced this with a fully digital workflow. Purchase orders are now created and stored electronically, goods-received notes are captured centrally, and e-mailed invoices are imported automatically.
The DocuWare platform matches each invoice to the corresponding PO and GRN using key metrics, removing the need for line-by-line checking and passing approved invoices straight into Sage 200 without manual data entry.
The impact has been immediate: faster processing, lower paper and printing costs, and far greater accuracy.
“Eliminating paper-based processes has resulted in substantial cost savings and accuracy has improved immeasurably…my team no longer manually input invoice data,” adds O’Raw.
Read the full case study.
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