Difference between Purchase Order and Pro forma Invoice

 The information provided here is part of Import Export online Training


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 purchaseDifference between Purchase Order and Pro forma Invoice copy 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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Comments


aster tay: Hi I would like to know does Proforma Invoice required to be signed by the seller and buyer? Regards aster

Peter Goeal: Dear Sir, Please explain to me below items: PI PO LC and other important parameter that we use for commercial. Thank you in advance.

surendran: Hi Peter Goeal, If you mean PI=Proforma Invoice, PO=Purchase order, LC= Letter of credit, you can visit same website to have information.

Andrés: Dear Sir I have sent some goods to a german friend from Turkey to Germany. The case is that we did not write any PI or PO, the transaction was carried out under a "frienship" concept that today's over. The goods already passed customs in Germany, they are in the transport company and my friend does not want to receive. Do I have any legal mean to demand. I have a document from customs where she (my friend) stated an authorisation for handling the taxes to the transport firm in Germany. She declined to received in the las moment, after sending this authorisation. Goods are in perfect state, it is just that she does not have means to pay taxes, I think. I would be grateful if you send me your comments, best Cristian

Venkatchari: I think purchase order is first put up the buyer to the seller. Then only the seller prepares the proforma invoice and sends it to the seller who agrees to it and conveys to the seller or returns a signed copy to him.

Surendran Kollerath: Hi Andres, As per my knowledge, if goods not shipped under proper procedures and formalities claiming may be difficult. I understand, the value of goods could be lesser than normal business transactions.

Bipin Panchal: What is the difference between QUOTATION and PRO FORMA INVOICE?. The QUOTATION is also prepared and issued against an enquiry by the seller before the purchase order is received from the buyer.kindly advice

Narendra Mallela : I'm planning to apply for new IEC code, in due course, have a few questions/concerns:- •Planning to register my new Import-Export firm name as "SRI BALAJI EXIM PVT LTD". Should I disclose the products I'll be importing/exporting or not necessary. What is the advantage of using "EXIM" in the registered company name, will it have any advantage IEC code wise, pl explain •Any particular banks (among the list of banks suported on dgft website) that have competitive commission rates, swift charges incase of TT, who doesn't delay in crediting foreign exchange etc., pl comment

Susie: If a company based in the USA receives a purchase order from "intercompany" based international for product to be shipped to another "intercompany" entity but is in a different country than the purchaser, does this need a proforma invoice?

Veronika Tondon: Purchase order is a document indicating types, quantity of products and services issued by a buyer or seller. It details the items the buyer agrees to purchase for a certain price. It also includes the payment terms, shipment, other associated terms and conditions. Or Invoice is a document issued by a seller to a buyer indicating items sold, prices, date of shipment, delivery and payment terms. It is also called as a “bill”, “statement” or “sales invoice”. The term invoice indicates money the buyer owes to a seller.

sonam: kindly show any fomat of pi po invoice and payment agreement invoice. thanks

Davuluri Ramakrishna.: I am Accountant in the Rice mill.Now I was faced some problem from commercial tax deportment. the problem is, the miller is sale some goods to out of country as a direct exporter.The dealer send proforma invoice to the seller. He is agreed to purchase goods by telephone talks. He is not send purchase orders.The seller is export the goods and received the money for the purchaser through bank. At the time of finely assessment the the deportment want to purchase invoice. there is no purchase order in my hand. so i submit LC copy. the department is not agree. so i was liable to tax@5%.sO GIVE ME CLEARIFICATION TO ME?

samim khan: kindly please explain why customer want proforma invoice for bank transfer.

Amit Singh: Dear Sir, Good Day! We have exported some goods from New Delhi, India to Karachi, Pakistan in the Month of May, June 2016. We are facing payment hold issue from the buyers. They are not paying the remaining amount to us. Kindly suggest what best we can do to receive our amount in full. Best Regards, Amit Contact No. +91 8588892020

sebastian mendes: Dear Sir / Madam, Please share the proforma invoice falls under which section of CGST

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