Four documents, one deal
A trade deal is a conversation that ends in money and goods changing hands. The four documents are the written steps of that conversation. Each one fixes something that was open before it, so that by the time goods ship, nothing is left to memory or to WhatsApp messages.
Here they are in the order they usually appear.
The quotation: the seller's offer
The quotation is the seller saying "here is what I can supply and at what price". It lists the items, quantities, unit prices, currency, delivery time, payment terms and how long the offer is valid.
It is usually an offer, not a contract; the legal effect depends on your contract and your country. Prices can still move, especially if the buyer changes quantities. A good quotation states its validity period clearly, for example "valid for 14 days", because that is the line most often argued about later.
In a trading company, you receive quotations from suppliers and you issue quotations to your clients. The second is built from the first plus your margin.
The proforma invoice: the detailed offer the buyer confirms
A proforma invoice, PI, looks like an invoice but is still an offer. It is more detailed than the quotation: exact item descriptions, HS codes if used, packing details, total weight and volume, port or delivery place, bank details for a deposit, and the full payment schedule.
Buyers use the PI to confirm the order internally and, very often, to make the deposit payment. Many banks accept it as the basis for a transfer. That is why it must be exact: whatever is on the PI is what the buyer will expect to receive.
The purchase order: the buyer's acceptance
The purchase order, PO, is the buyer's formal "yes". It repeats the items, quantities and prices from the PI, adds the buyer's order number, the delivery address and date, and any conditions the buyer requires. Once the seller accepts the PO, the deal is agreed.
Two mistakes cause most PO disputes. First, a PO that does not match the PI, because someone changed a quantity on the phone and only one document was updated. Second, a PO issued against an expired quotation, with the buyer expecting old prices.
The commercial invoice: the request for payment
The commercial invoice is the real invoice. The seller issues it when the goods are ready or shipped, and it states exactly what was supplied and what is owed, with the payment terms and due date. It travels with the shipment and is the document everyone downstream refers to. Whether the authorities in a given country need it in a particular form is a question for your customs broker, not for this article.
If the deposit was paid on the PI, the commercial invoice shows the deposit received and the balance due.
The four side by side
| Document | Issued by | Usually binding? | What it does |
|---|---|---|---|
| Quotation | Seller | No | States prices and terms for a period |
| Proforma invoice | Seller | Offer | Confirms every detail; basis for a deposit |
| Purchase order | Buyer | Yes, once accepted | Formally places the order |
| Commercial invoice | Seller | Yes | Requests payment for goods supplied |
The mistakes that cause disputes
- Documents that drift. The PI says 500 units, the PO says 450, the invoice says 500. Each document was typed separately and one was not updated.
- Missing validity on the quotation. The buyer comes back after two months expecting the same price.
- Unclear payment terms. "30% deposit" without saying when the balance is due, or against which document.
- No order number. Three deals with the same supplier and nobody can tell which payment belongs to which.
- Different units. Pieces on one document, cartons on another.
Every one of these comes from retyping. The cure is to keep one record per deal and generate every document from it, so a change in one place appears in all four. That is how our AI trade manager works; our article on running a deal from request to invoice in one system walks through it, and the package details are on the services page.
A simple habit for small traders
Even without software, one habit prevents most trouble: never issue the next document by hand. Copy the previous one, change only what changed, and give every deal a number that appears on all four documents. When something is disputed, you will have one chain of paper that agrees with itself.
If you have a deal where the documents do not agree and want a second pair of eyes, message us on WhatsApp.