A pro forma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. It is an invoice, usually one sent to a new customer, asking for payment before goods or services are supplied. The word, ”Pro-forma” means in the form of; the Pro-forma invoice is thus not an actual invoice but is in the form of an invoice that shows the nature, quality, quantity, number, weight, measurement, price, etc. of the goods sent on consignment. The invoice will typically describe the purchased items and other important information, such as the shipping weight and transport charges. The price quoted on it may be cost price or selling price, which the consignee is to charge or an indication of a morpheme price below which the consignee must not sell. It is sent by the consignor to the consignee. These invoices are sent to buyers ahead of a shipment or delivery of goods or services.
A proforma invoice is a preliminary bill of sale that is sent to the client before the work is completed. A pro forma invoice requires only enough information to allow customs to determine the duties needed from a general examination of the included goods. This is different from a purchase order, in that the purchase order is issued from the buyer to the seller. It’s a commitment to goods or services that have yet to be delivered. It lists the work to be completed, the quantity, and the price you’re charging for the products or services. Proforma applies to invoices that are not yet completed which means that the invoices do not have an invoice number that is needed for every legal invoice.
Advantages to pro forma invoices –
- They’re ideal if you don’t have all the details for a commercial invoice – for example, before the goods are delivered.
- As an extension of this, pro forma invoices are usually sent to declare the value of goods for customs for a smooth delivery process.
- Pro forma invoices are ‘good faith’ agreement so your customer knows what to expect.
- Some businesses request pro forma invoices for their internal purchasing approval process.
The purpose of this document is to ensure the seller and customer are on the same page about the agreement, including the price of the goods and services. Understanding the different types of invoices is therefore key to the development of sound business practices in your company. A carefully drafted proforma invoice details all the specifications of a transaction.