In my previous articles, I have explained these two important documents in detail. If you want to learn more about them, please just click the links below.
- What is a proforma invoice? How does it work?: In international trade, a proforma invoice can be defined as a type of commercial document, which is issued by the exporter in order to submit the terms and conditions of the sale in a written format to the importer's approval at the beginning of the transaction.
- What is a purchase order? How does it work?: In international trade, a purchase order can be defined as a type of commercial document, which is generated by importer in order to authorize an import transaction.
Today, I would like to outline the differences between the proforma invoice and purchase order.
What are the differences between proforma invoice and purchase order?
Issuer of the Documents:
- Proforma Invoice: Proforma invoice issued by the exporter and sent to importer's approval.
- Purchase Order: Purchase order issued by the importer and sent to exporter's attention.
- Proforma Invoice: It is expected that CIF, CFR, CIP, CPT delivery terms more likely to require a proforma invoice than a purchase order, because according to these Incoterms sellers have to arrange and pay for the main carriage.
- Purchase Order: Under EXW, FCA and FOB delivery terms, importers could issue purchase order more easily, because main carriage is arranged by the importers. Additionally, these Incoterms are preferred by professional, well-established importers, who tend to work with purchase orders.
- Proforma Invoice: 1st time orders require a proforma invoice more than a purchase order, because importers may not be having full details of the transaction, including shipment details, to prepare a purchase order.
- Purchase Order: If exporter and importer have established a regular business relationship, meaning periodic shipments are in place from exporter to importer, then purchase order is more likely to be used instead of a proforma invoice.
Related Pages For Further Reading: