Purchase order vs Proforma invoice: what each one is for

A purchase order is issued by the buyer at the commitment stage; a proforma invoice is issued by the seller at the preliminary bill stage. They are 1 steps apart in the order-to-cash flow, and mixing them up costs real money.

Purchase order: commitment · Proforma invoice: preliminary bill

Side by side

	Purchase order	Proforma invoice
Issued by	the buyer	the seller
Sent to	the seller	the buyer
Stage in the flow	3 — commitment	4 — preliminary bill
What it does	commits the buyer to purchase specific goods or services at agreed prices and terms	shows the buyer what the final invoice will look like, often to arrange prepayment, a letter of credit or import paperwork
Commitment	binding once accepted	not binding
Requests payment?	no	no
Proves delivery?	no	no
In the accounts	a commitment, recorded as an open PO, not yet a liability	not booked as a sale; no tax point is created
Lifetime	stands until fulfilled, cancelled or its delivery date passes	usually valid until the stated date or until the real invoice replaces it
Make one with	Purchase Order Generator	Invoice Maker

The deciding difference

The PO is the buyer's commitment; the proforma is the seller's preview of the bill, often issued in response to the PO when payment is needed up front. Neither is the invoice, and neither triggers a tax point, but the PO binds the buyer while the proforma binds no one.

The shortest test: ask what happens if the purchase order is ignored, then ask the same of the proforma invoice. Ignoring the purchase order means the seller has no authorised order and the buyer has no protection on price or delivery; ignoring the proforma invoice means prepayment or customs clearance stalls, but nothing is owed. The document with the harder consequence is the one that carries the obligation.

Where each one sits in the flow

The purchase order is issued at stage 3 and the proforma invoice at stage 4 of the eight-step order-to-cash sequence. The steps between them, if any, are the documents that normally connect the two:

3. Purchase order (this page) — The buyer's formal order: what, how many, at what price, delivered where and when.
4. Proforma invoice (this page) — A preliminary invoice sent before delivery, used for prepayment and customs, not for the books.

Steps before the purchase order and after the proforma invoice are on the business documents hub, which shows the full eight-step sequence with a checklist for every document.

Worked scenario

Harbour Café's PO-2026-0142 asks for twelve worktops with 50% on order. Northgate Joinery replies with proforma PF-0315 for the $1,110 deposit, quoting the PO number. Harbour pays the deposit against the proforma; the final invoice, issued on delivery, shows the $1,110 already received and $1,110 still due.

Can one replace the other?

Because the purchase order commits the buyer to purchase specific goods or services at agreed prices and terms and the proforma invoice shows the buyer what the final invoice will look like, often to arrange prepayment, a letter of credit or import paperwork, one cannot stand in for the other. What you can do is reference one on the other, which is exactly what the numbering section below is for.

Numbering and matching

Both carry their own number. Purchase order: The buyer's number; suppliers are expected to quote it on the delivery note and the invoice so accounts payable can match the three documents. Proforma invoice: Numbered separately from real invoices, and clearly labelled 'proforma', because it must not enter the sales ledger or a tax return. The reference from one to the other is what lets an accounts team match documents without phoning anyone.

Common mistakes

On the purchase order side, watch for paying an invoice that has no matching purchase order, which is how duplicate and unauthorised spend slips through. On the proforma invoice side, watch for recording a proforma as revenue or claiming tax on it, when it is not a tax invoice. The order-of-events list above is the check: if a document is being issued out of sequence, something upstream is missing.

Checklists: what to include in a purchase order and what to include in a proforma invoice.

Frequently Asked Questions

How are the purchase order and the proforma invoice treated in the accounts?

The purchase order is a commitment, recorded as an open PO, not yet a liability. The proforma invoice is not booked as a sale; no tax point is created.

What is the difference between a purchase order and a proforma invoice?

The purchase order is issued by the buyer and commits the buyer to purchase specific goods or services at agreed prices and terms; the proforma invoice is issued by the seller and shows the buyer what the final invoice will look like, often to arrange prepayment, a letter of credit or import paperwork. The purchase order is binding once accepted, the proforma invoice is not binding.

Which comes first, the purchase order or the proforma invoice?

The purchase order. In the order-to-cash sequence the purchase order sits at stage 3 and the proforma invoice at stage 4, so the purchase order is issued before the proforma invoice.

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