subject: What is a proforma invoice and when do I need to use one? [print this page] What is a proforma invoice and when do I need to use one?
Proforma is a Latin term which means "for the sake of form". A dictionary would define the term as meaning "provided in advance so as to describe items". Simply put, a proforma invoice is sent prior to the delivery of goods or services, and functions much like a quotation does.
The proforma invoice as with any sales or service invoice provides all the details such as the company's name, logo, address and contact details. Methods of payment and payment terms are also clearly outlined. The client's details are added as is the date and an invoice number for easy reference and filing purposes. This invoice will detail the intended saleable items as required by the client. It will detail quantity, weight and cost per item. Obviously, additional costs such as sales tax will be included.
Customs officials will expect a proforma or estimated invoice to be sent ahead of the delivery of goods which are being exported. The importer concerned will expect the invoice then to contain the shipping costs if applicable. Any buyer needing an import license or needing to change currency for the purposes of payment will need this information in advance, before accepting the contents and goods detailed in the preliminary invoice sent.
Import and export issues and requirements aside, many small businesses have begun to use a proforma invoice and thus eliminate the necessity of quotations, followed by an invoice, followed by a statement of account. As with a quotation, it is important that the seller or service provider places a limitation on the offer or agreement to sell the goods or services. If a sale is dependant on an exchange rate then the invoice must indicate that such a sale or quotation is dependant on the currency exchange rate on the day of shipment or delivery, as well as any expiry date attached to the issuing of this invoice.
As with any business documents the staff responsible for this aspect of the company must make sure that they adhere to correct filing procedures.
