Proforma Invoice vs Purchase Order — Key Differences Explained

A proforma invoice and a purchase order are both pre-transaction documents, but they flow in opposite directions: the seller issues the proforma invoice; the buyer issues the purchase order. Understanding which comes first — and what each commits both parties to — prevents payment disputes and procurement delays.

Who issues each document?

Which comes first?

In a typical B2B workflow:

1. Buyer sends a Request for Quotation (RFQ)
2. Seller issues a Proforma Invoice (price, quantity, delivery terms)
3. Buyer reviews and approves internally
4. Buyer issues a Purchase Order referencing the proforma
5. Seller confirms the PO and begins production/delivery
6. Seller issues a Commercial Invoice after dispatch

The proforma invoice comes before the purchase order. The PO is the buyer's formal acceptance of the terms set out in the proforma.

Key differences

Do I need both?

For small or informal transactions, many businesses skip the purchase order and go straight from proforma to commercial invoice. For corporate buyers, construction projects, government procurement, and any transaction over a meaningful threshold, both documents are expected — the PO protects the buyer and the proforma protects the seller.

When there is no purchase order

Some buyers — especially SMEs and individual importers — never issue a formal PO. In this case, the proforma invoice itself functions as a de facto order document once the buyer pays the deposit or confirms acceptance in writing (email). Always keep that written confirmation on file.

Can a proforma replace a purchase order?

Not formally. A proforma invoice cannot bind the buyer to purchase — it is the seller's offer. A PO binds the buyer. However, many banks treat a signed or acknowledged proforma invoice as sufficient evidence of a pending transaction when processing Letters of Credit.

Practical tips

• Always quote your proforma number on your commercial invoice — it links the full document chain.
• When the buyer sends a PO, check that the PO values match your proforma. If there are discrepancies, issue a revised proforma before starting production.
• For export LC transactions, the PO may not be needed — the LC itself authorises production. The proforma triggers the LC.

Create a proforma invoice using our free online generator or download a free proforma invoice template.