Some of us may misread the proforma invoice as INVOICE but both are not the same
In addition to those stated in the previous section like estimated sales quantity, price, costs and commissions etc a proforma invoice must have the following particulars :
Other information that a seller thinks he or she requires to inform to the ultimate buyer can be added.
A pro forma is required when a customer requests to the buyer for giving information regarding the goods or service that is yet to be delivered. It is a preliminary price quotation as well as additional details of a specific product or service before its actual sale. This document is majorly used for the purpose of exports or imports for a smooth delivery.
Some of the major uses and need of Pro forma invoice are as follows:
Export and importFor various clarifications in the trade transactions, pro forma invoices are used. In exports and imports the issues regarding currency, exchange rates, various other details are clearly explained in this document.
Custom duty calculationsWhen goods are crossing borders, this document is useful for computing projected costs of custom duties. It contains details of all factors in a specific trade obligation.
Clarification and contact detailsIt serves as a source of contact between the seller and a buyer. It includes all the details of contract and clarified details. The seller may replicate the final invoice with the help of this document.
The format of Pro Forma invoice is not prescribed in any guidelines. It may look like a commercial invoice. The label on the document should be clearly stated as “PRO FORMA”, so that it reflects that it is estimated and not the final tax invoice. A sample format has been created below for ready reference.
|Basis||Proforma Invoice||Purchase Order||Invoice||Estimates|
|Concept||It is a document issued by the supplier to the buyer providing information regarding the goods or services that are yet to be delivered.||It is a document that is sent to the supplier by the buyer which has the list of the goods or services that the buyer wants to purchase.||It is a commercial document issued by the supplier to the buyer containing details of the goods or services supplied to him or her and a notification that the payment is due.||It is a formal estimate of required goods or services and the total amount owed for the same.|
|Usage||It helps the buyer in taking decision whether to place an order or not.||It is used for placing an order of goods or services from the supplier.
||It notifies the buyer that the payment is due.||It provides estimated sale price of the goods or services yet to be delivered.|
|Importance||It gives the customer a clear idea of what to expect from an order.||It helps businesses in managing orders, budgets and set business expectations.
||It enables business to receive money and updates incoming payments.
||It provides detailed information of the offerings to the customers.|
|Issued when||It is issued before the delivery of the goods or services to the buyer.
||It is issued after the receipt of the pro forma or quotation from the supplier.
||It is issued before the payment is received by the supplier||It is issued on request of buyer before the delivery of the goods or services.
|Furnished to||It is issued to buyer or customer||It is issued to Supplier||It is issued to buyer or customer||It is issued to buyer or customer|
|Furnished by||It is raised by Supplier||It is raised by buyer or customer||It is raised by supplier||It is raised by supplier|
|Flexibility||It is Negotiable||It is not applicable||It is non negotiable||It is negotiable|
|Consequence when accepted||It leads to Creation of sale.||It leads to contract of sale.||It leads to Confirmation of sale.||It also leads to Creation of sale.|
For a clarification in any transaction related to the buying and selling of goods or services, the related entities needs to furnish various documents. One such document is Pro forma invoice that includes all the estimated details regarding the goods or services before the delivery of the same. With this document the final invoice is made if the terms and conditions of pro forma is accepted by the buyer.
Yes, the pro forma invoice is negotiable document. A buyer can negotiate on various details such as pricing, delivery time, shipping costs and so on.
The validity varies from business to business or industry to industry.
The pro forma invoice is issued by the supplier to the buyer for purchase approval process.
Businesses involved in all industries often use pro forma invoices to satisfy their internal purchasing-approval process