Difference between Purchase Order and Pro forma Invoice

Posted on 10 April 2023 Category : For Beginners

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Difference between Purchase Order and Pro forma Invoice

This article is a part of series of replies on questions asked by beginners (among beginners) relates to basics of export and import trade. As I have explained, please accept my apology on my inability to reply individually for all questions. However, I treat each question of you is valuable. You can certainly expect reply on all of your questions in this website as articles which will be posted time to time.

What is a Pro forma Invoice and how proforma invoice differs from Purchase order?
Let us discuss about Proforma Invoice. How does Performa Invoice work?

Let us discuss – ‘when is pro-forma invoice issued’.

Once after agreeing the terms of contract of sale, the buyer has to issue a purchase order or Letter of Credit. Just before this process, the seller has to send a ‘pro-forma invoice’ to buyer, mentioning complete details of agreement of sale. Normally, purchase order or Letter of credit is opened on the basis of this pro-forma invoice sent by the seller.
So, we can treat pro-forma invoice as a document of commitment to sell the goods to the buyer as per the terms and conditions agreed between both in person, over telephone, by fax, email or any other mode of communication. In other words, we can treat the pro-forma invoice as a ‘confirmed purchase order’ from the seller, although the official purchase order has to be issued by the buyer. The pro-forma invoice is issued before sales takes place.
Once after receiving pro-forma invoice from the supplier, the buyer sends a purchase order or opens a letter of credit to the supplier.

How does Purchase order work?

Once after completion of enquiry procedures between buyer and seller about the details of product and after satisfaction of quality, price and terms and conditions the seller sends a pro forma invoice to buyer. Based on such pro forma invoice, buyer release a Purchase order to seller as confirmation of purchase of his goods. Purchase order contains the details of product, quantity, price, payment terms, delivery terms and other terms and conditions of purchase contract as mutually agreed between buyer and seller. Normally purchase order is prepared by buyer on the basis of pro forma invoice sent by seller to buyer. Once after acceptance of purchase order by seller, the purchase contract exists.

Also read - Difference between Purchase Order and Commercial Invoice How to prepare Purchase order How to prepare an Export Invoice

Do you have different opinion on Purchase order and Pro forma Invoice? Write below about Pro forma Invoice Vs Purchase Order.

The above information is a part of Export Import Training course online

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Terms used in freight forwarding such as Purchase Order,Quay Rent,QUEENS WAREHOUSE,Radio Frequency, Ramp , Rebate,Received Bill

Terms used in shipping such as Protective Clauses,Protective Order ,Protest System,Purchase Price, Purchaser

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