How Does a Proforma Invoice Look Like?
A proforma is a type of invoice that is classified as a binding contract between the seller and the buyer. It does allow for the option of changing the sales terms when necessary. Buyers can rely on the sales price shown on the proforma invoice as being accurate. This type of invoice may also include estimates for commissions or fees. The proforma invoice can be subject to change, but it is considered as a good faith estimate. A typical a proforma invoice contains the following:
A proforma invoice contains a heading and a section for the date and the number assigned to the invoice.
Sent By Section
This section of the invoice will contain information about the sender of the invoice, including the following:
- Company Name
- City/State/Postal Code
- Telephone Number
Airway Bill Section
This portion of the document contains:
- Number of Pieces
- Total Gross Weight
- Total Net Weight
This section allows for the entry of different types of goods with information pertaining to each of them as follows:
- Description of Goods
- Sub Totals
A proforma invoice is completed with the following information:
- Total Value
- Term of Transportation
- Reason for Export
Proforma and Customs
Customs relies on different types of invoices to assist them with their responsibilities. One invoice is the commercial invoice. The proforma invoice allows the customs department to have a general description of the goods and with their inspection, they can determine the necessary custom charges. Proforma invoices can be used for custom purposes, but if so, then it must be followed up with a commercial invoice within a period of 120 days.
When to Use a Proforma
Invoicing is absolutely an integral part of your small business. An invoice is sent or received from suppliers when making payments. If you are running a business, you have probably used the term “proforma invoice” more often than not. However, you may experience difficulty knowing when to use it. A proforma invoice should not be confused with the standard invoice, and it only applies to invoices that are not complete. In any case, a proforma invoice features no unique number as applied in legal invoices. Neither does this invoice carry fiscal value, and thus, never include it in your accounting records. In fact, such an invoice should be labeled “Proforma” in bold.
When to Issue a Proforma
Issue a proforma whenever a product or service is under negotiation, or when you have not finalized the sale. This will provide a clear indication of what the final invoice will look like. Ensure that the format can be adjusted if need arises. Also, you can use proforma invoices in shipping processes, especially in place of a delivery note. It will include details about weight and packaging as well as delivery date and fees. Given that you issue a proforma invoice before delivering a good or providing a service, the client can still negotiate and request changes before the final payment is made.
Conversion to a Complete Invoice
After you have finished all revisions, you can easily convert a proforma invoice into a complete invoice. Be sure to replace the title “Proforma” with “Invoice” and add an invoice or sequential number for that matter. Otherwise, the document won’t be regarded as legally binding. While there’s no specific format of a proforma invoice, it’s crucial that you adopt a standard invoice template. This will make it easy to convert it into a complete invoice.