This is basically a document whose use is viewed as a formality and is send to the buyer by the seller when goods are in the process of being sent. The intention of the seller in this case is to seek an assurance from the buyer that payment will be settled for goods that are due for delivery. It also signifies an agreement between them regarding the terms of sale and the cost of the whole transaction.
It can never be used to note down accounts payable on the part of the buyer or accounts receivable on the part of the seller since it is not a true invoice. The proforma invoice has several features which include the date, the logo of the company. This applies to the seller or the company sending the goods. It also contains an invoice number together with handling, tax rate and the shipping rate of the consignment.
Another feature that is important in such a document is the name and addresses of both the receiver and sender. This appears to be a standard feature in documentations of this nature. There will also be a clear description of the items in a given consignment in this document as far as quantity and price are concerned.
The transport mode to be used as well as the weight and total packages are indicated in a proforma invoice. The preparation of this document is not complicated because it only entails a simple process as long as you have all the necessary details at hand. In order to prepare one you will need to;
Step1
Consider all the costs you are likely to incur as a seller as you plan to ship the goods to the buyer. This will help you to be as precise as possible as you note down the total figure of sending the consignment. Such costs will include duties and custom fees, transportation and shipping costs, taxes, storage costs, insurance costs among others.
Step2
Basically, the format of preparation is similar to commercial invoices you are currently using though the word “Proforma Invoice” has to be indicated on the front top page of the document. If it has a validity period, this needs to be indicated together with exact details of both the receiver and sender.
Step3
The description of each item needs to be indicated separately if there are a number of items to be shipped and this needs to be as detailed as possible. The country of origin is a requirement by customs and it need to be indicated too. These details will include the model number, size of the item(s), color of the item(s) and any other details that are of a relevant nature.
Step4
Where several items are involved, you need to indicate the total number of each item as well the cost of each piece of a particular item. You also need to indicate the terms of payment in a proforma invoice and the currency to be used in this case depending on your preference.
Step5
Towards the conclusion you need to convince the buyer that you have been vested with the powers to carry out such a transaction by indicating the capacity you hold in the sending organization. This will erase any doubts on the part of the buyer with reference to the transaction. Your name needs to be in full and in block letters and don’t forget to include the date and your signature.
When this is finally done, your proforma invoice is ready to be sent to the buyer since it captures all the necessary details that are required in the transaction. Omitting any one of these details will imply that the document is non authentic and cannot be relied upon by the buyer in such a transaction. A seller is likely to lose business when this is the case since it raises questions regarding transparency.
Though the proforma invoice may include all these details, the customs officials may not necessarily pay attention to them when indicated therein. This means that if details on description of items lacks, such officials will still use such a document as long as it has a value attached on it. This is primarily for evaluation and establishment of duties to be levied.
This is contrary to commercial invoices which need to be specific in all ways with precise details. Once it has been presented to customs officials in some situations, it has to be followed by a commercial invoice within 120 days from the date of presentation. This is the case in the United States and this is because it lacks sufficient ground to stand on its own as a legally binding document between the parties involved.
In terms of differences, these are part of the most significant ones that every individual in transactions of this nature needs to bear in mind. A proforma can thus be described as an informal document. Below are sample templates of proforma invoices.
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