What is a Pro Forma Invoice?
A pro forma invoice is also known as an estimate or a quote. It is a preliminary “bill of sale” sent to a buyer before the goods are delivered to them. It outlines the seller’s intent to complete this delivery for a specific price. This is not considered a ‘true’ invoice, as it hasn’t been agreed on yet. Most people look at this more as a “notification.”
How is Pro Forma invoice different from a Commercial Invoice?
A Pro Forma invoice is very much like a Commercial invoice, except it contains estimated prices, versus actual ones. It serves as an ‘expectation’ of how much money must be paid, as it is a more generalized invoice before the sale is finalized. Oftentimes, a Pro Forma invoice looks exactly like a Commercial Invoice. However, it is not accepted by the Customs authority in most countries as it is not perceived as a finalized or legit documentation.
Why are Pro Forma invoices used?
Pro Forma invoices are used to streamline the sales process, as the customer agrees to the price on this invoice, then you deliver the goods to them. After agreeing upon the terms of a Pro Forma Invoice, there is no going back and forth into negotiations, because this sets an ‘agreement’ between the two parties.
When should a Pro Forma Invoice be used?
A Pro Forma Invoice is useful when:
- You don’t have all the details for a Commercial Invoice
- They ‘declare’ the prices of goods in a shipment for Customs- this streamlines the process
- They’re ‘good faith’ agreements, they do not request payments
Takeaways from pro forma invoice:
- These are not official documents and provide the buyer with a precise sale price- an accurate amount of charge will be billed after the completion of the transaction.
- This invoice requires only sufficient information to allow customs to indicate the duties needed from a general examination of the goods included in the shipment.
- There are no exact guidelines dictating the exact format of a pro forma invoice.