Proforma Invoice

Definition of pro forma invoice: a document provided prior to or with a shipment of goods (as for export) that describes the items and terms of sale but does not have the function of a real invoice First Known Use of pro forma invoice 1857, in the meaning defined above. Proforma invoicing gives project managers a second level of approval before they create invoices for customers. The first level of approval is completed when time, expense, and material entries that project team members submit are approved. Confirmed proforma invoices are available in the Project Accounting module of Project Operations.

Posted in category INVOICE TEMPLATESBUSINESS & WORK

A proforma invoice is an invoice form, usually provided by a vendor prior to provision of the physical goods or service, to officially declare the value of the trade. The proforma invoices by nature are very similar to the sales quote or confirmed purchase order in the form of an invoice prepared by the seller, which provides detailed information about the items and shipping cost, which will appear on the commercial invoice when transaction is finalized. Proforma is also almost identical to a commercial invoice and is usually considered as binding agreement, depending on the circumstances. In business terminology, pro forma (Latin 'as a matter of form' - is a term applied to practices or documents that are done as a pure formality) often used as financial statement which prepared in advance of a planned transaction.


A proforma invoice is a common form used in both domestic and even more commonly in international trade to provide buyers as well as in the event of international trade the appropriate import/export authorities, where additional details may be required for customs, with required information about shipment.

Below we offer a couple of proforma templates, with different design and styling, which you can easily customize and print. We have also put together some useful information about how to use proforma invoices and few references to the source of information where you can read more about regulations of use of this document.

Pro Forma Invoice

Proforma Invoicefor Excel® 2003+ & OpenOffice
1
Requirements
Microsoft Excel® 2003 or Higher (PC & Mac)
Installation
Not Required
License
User License Agreement

Disclaimer - The proforma invoice and information on this page is intended for educational an illustrative purposes only. Use this information at your own risk. It is strongly advised to consult the appropriate authorities or seek aid of professionals prior to applying this template to you practise.

This template contains three different formats, each on the separate worksheet, typical portrait format, landscape and third, which is also a portrait, but designed specifically for printing on your own letterheads, which practically requires minimum customization.

How to use proforma invoice

When it comes to customizing this template, most of the instructions for customizing pro forma invoice that we could possibly provide is to change the values in square brackets [...] and inserting your companies logo, since it's been designed in line with a typical to pro forma invoice standards, although the standards may be different for other countries, therefore we strongly advise consulting with appropriate professionals prior to applying it to your practise.

Why Should I Use Proforma Invoice?

Proforma Invoice Means

Clarification and Contact Details
Pro forma invoice can be identified as the most correct way of providing complete quote to buyers, that contains detailed information of the goods, costs, customs and shipping fees as well as contact details for both seller and buyer and terms of transaction, which is sent in advance of the commercial invoice, that is the final bill that the buyer agrees to pay.

International Trade, Export and Import
Some of the advantages of pro-forma invoice to the importer include to show to the appropriate authorities for foreign currency allocation, for instance if one country is purchasing goods from another country, there may be currency and exchange rate issues, that would be clearly explained through the use of a pro forma invoice. Other advantage of this document is opening letters of credit and most importantly, to have a detailed information on the transaction that can help to plan.

Custom Duty Calculations
In most countries pro-forma invoice is required and used by customs document that helps to calculate the anticipated cost for customs duties when the goods are crossing borders that helps to avoid surprises in trade exchanges and aims at addressing all factors which may be involved in specific trade obligations.

Additional Source of Funding
The pro forma invoice can really become handy, when buyers need to seek for additional funding source for the project in the event where transaction trade involves significant cost, which may be required by financial institution as a base of establishing a letter of credit to the buyer.

Non-Binding Document
The contents of pro forma invoice may look similar to the final commercial invoice, however, for all intents and purposes is not usually binding on the parties involved, what gives the seller an opportunity to revise the cost calculations prior to issuing the final cost, when at the same time, buyers have the option to review the planned purchase, and may decline the purchase altogether.

An invoice may seem like a straightforward concept—it’s a document that states the terms of a sale between a buyer and a seller—however, companies have to deal with various types of invoices that all have different purposes. Understanding their differences will help you create an efficient accounts payable workflow and avoid costly mistakes, like paying an invoice twice or violating regulations.

What Exactly is a Proforma Invoice?

A proforma invoice (also known as a pro forma invoice) is a preliminary bill of sale that comes in advance of delivery, issued by sellers to buyers. This type of invoice serves as a binding agreement for the seller to provide the products or services.

A proforma invoice outlines the terms of the sale and typically contains product descriptions, price of products, terms of delivery, and an expiration date of the invoice. It is meant to give a cost estimate of the sale, not the final sale, and the terms are subject to change.

When Does the Seller Issue a Proforma Invoice?

Proforma invoices are typically used for export sales when a commercial invoice is not yet available. In other words, when the seller has to still pay for the goods. U.S. Customs requires that the proforma invoice contains adequate information for examining the goods and assessing duties. If the seller already paid for the goods, then U.S. Customs requires a commercial invoice.

A proforma invoice is not limited to just the import of goods. A seller can create a proforma invoice anytime at the request of the buyer.

What Information is Required in a Proforma Invoice?

When used for export sales, a typical proforma invoice should contain the following information:

Proforma Invoice Ax

  • Detailed product descriptions such as the country of origin and the product classification (the six-digit Harmonized System or Schedule B number) that U.S. Customs use for determining duties and taxes.
  • Price of the products
  • Delivery terms, such as the package origin and the delivery location
  • Expiration date of the proforma invoice

Proforma Invoice Vs Commercial Invoice

An invoice is a non-negotiable instrument and must contain a handful of specific information: date of invoice, date of goods delivered, detail of products, contact details of seller and buyer, payment terms, and total due.

What’s the Difference between a Proforma Invoice and a Purchase Order?

At face value, a proforma invoice sounds the same as a purchase order. Both types of documents contain descriptions, quantities, prices, discounts, payment terms and other terms of the sale. However, the difference is, the origin: the seller prepares and sends a proforma invoice to the buyer. When it comes to a purchase order, it’s the buyer (and its accounts payable department) who issues and sends it to the seller and uses the document for invoice matching when disbursing payment.

A purchase order is considered a commercial document, meaning an official confirmation of a sale, while a proforma invoice is a quote from a sale, not a confirmation. That’s why the terms in a proforma invoice are still subjected to change while a purchase order is a legally binding agreement.

What are Best Practices for Handling Proforma Invoices?

Since a proforma invoice is a quote rather than a confirmation a sale, the terms are subjected to change before the final invoice. That’s also the reason why accounting does not record a proforma invoice—it’s not a real invoice. However, buyers can still follow best practices when it comes to handling proforma invoices:

  • While the proforma invoice is subjected to change, it still should be as close to the actual sale as possible.
  • When dealing with export sales, advise sellers that their proforma invoices should contain information that is transferable to create other forms, such as a commercial invoice.
  • Make a note of the date of the proforma invoice. Items like material costs, international fees, and currency rate are fluctuating prices and will rise and fall depending on the market.