It seems like this is a bug.
Purchase Order does not reflect payment made prior to receiving Invoice or purchased item. #8139
When I make a Journal Entry or Payment Entry in full value against outstanding amount of a Purchase Order, (before having the bill or receipt of material) it is correctly registered in the Journal, the linked Journal/payment entry is correctly shown, but the status still shows “To Receive and Bill”. It should read "Paid, Awaiting Receipt and Invoice. If a Purchase Invoice is created from that Purchase Order, and it is already paid as mentioned before, the status upon validation of the Purchase invoice should be “Paid, Awaiting Receipt”.
It’s not really a bug - ERPNext doesn’t connect the Purchasing with the Accounting, so there never is any notice in the Purchasing section of payment. A more potentially concerning quirk of this is that when you have received an Invoice and the items (with PI and PR created and submitted) but haven’t yet paid the PO, the status shows as Completed.
I’m not sure the reason for this, except that Accounting and Purchasing are somewhat different departments so you may want to keep that information separate. The only way to see if payments have been made against a Purchase Order before a bill is created is to look at the Advance Paid field in reports.
I think it’s an enhancement that would be useful.