What Is A Pro Forma Invoice?

An estimated invoice which a buyer gets from the seller before the arrival of a shipment or delivery of goods is called a pro forma invoice. This invoice contains the following details:

  • Kind of goods
  • Quantity of goods
  • Value of goods
  • Weight of the consignment
  • Transportation charges on the consignment

These invoices have quotations and are accepted as preliminary invoices. However, they differ from a normal invoice as the payment cannot be claimed based on a pro forma invoice.

What Are The Two Types Of Invoice

Difference Between Pro Forma Invoice and Commercial Invoice:

Attribute Pro Forma Invoice Commercial Invoice
Definition Pro forma invoice is similar to a commercial invoice but the information provided can be changed later on according to the terms agreed upon between the buyer and the seller A commercial invoice works as an instrument given by the buyer to the seller and contains every necessary information which is required about the items or the services
Usage It is typically used as quotation It is used as the final bill which contains the billing amount/td>
Acceptance Creation of sale Confirmation of sale
Time of issue Accepted before the order is placed Valid during the time the payment is made for the invoice
Posting in accounting books This kind of invoice doesn’t enter the account books as it is not the final invoice All the commercial invoices/bills are entered in the account books of the company
Objective It helps the buyer get clarity on whether to place the order or not Acts as an instrument which informs the buyer regarding the final payment due to the seller.

What Are The Advantages Of A Pro Forma Invoice?

A pro forma invoice comes with its own set of added advantages. Listed below are the benefits of a pro forma invoice:

Unlocking Money By Clearing Unpaid Invoices:

  • Pro forma invoices are an ideal choice for those who don't have all the details required for a commercial invoice before the delivery of the goods.
  • These invoices serve as a declaration of the price of the goods for customs.
  • Businesses which have an understanding between them demand it for their internal purchasing approval process.
  • These invoices are issued only in 'good faith.'

How Does Pro Forma Invoice Help In Customs?

For customs to allow the pass-through of goods or services, a company must have specific documents. This is strictly followed, especially by the United States, which requires an invoice containing the list of substantial information like who is the buyer, the seller, the quantity of the goods, a description of the goods, the total amount for all the items, and where the item is headed.

A pro forma invoice contains all the details required for the customs to decide the duties required from the examination of the mentioned goods. It is crucial to remember that if a pro forma invoice is issued by a company to present in front of customs, it is mandatory for the company to submit the commercial invoice within 120 days.