Tell me about the pro forma invoice.
"Proforma" means "Proforma," a term used to estimate the price of services or invoices for goods prior to shipment or delivery. In situations where you can't provide your customers with an exact price, you can post pro forma information, but you can still give them a rough idea of the costs involved.
If you import goods as part of your business, you can use a proforma to estimate their customs clearance value, but you still need to provide a commercial invoice within 180 days.
When do I use commercial invoices?
Because a commercial invoice is a document issued after the shipment or delivery of goods, it serves as a legal record of the transaction once the sale is completed.
This type of invoice also contains more details than a pro forma invoice, including information about the buyer and seller, the place of purchase and a full description of the goods. Also, if you are in your business dealing with international shipments, you actually need to use a commercial invoice.
Purpose of Proforma Invoices and Commercial Invoices
The purpose of a pro forma invoice is to give the customer a clear idea of what to expect. This is a bona fide estimate that shows what can be known ahead of time, such as price and terms, and the average billable amount for the type of item requested. Customers can also use pro forma invoices to decide whether to place an order.
The purpose of a commercial invoice is to request payment for an item actually sold by showing the amount actually due.
Format of Proforma Invoices and Commercial Invoices
A pro forma invoice may look almost identical to a commercial invoice. However, it should be clearly marked "form" or use other language to reflect the fact that this is only an estimate and should not be paid until the work is completed and the final invoice is issued.
Proforma vs. Commercial Invoice: 3 Key Differences
In conclusion, although pro forma invoices and commercial invoices look very similar, there are three main differences between the two documents:
1. When will it be released
When a company receives an inquiry from a potential international customer for one or more of its products, it issues a pro forma invoice as a quotation, which lists not only the cost of the goods, but also the terms of sale. Potential buyers can accept the price and terms listed in the pro forma invoice, or make a counter-offer to negotiate.
2. What do they include
While the type of information that appears on both invoices may be similar, the commercial invoice should represent the final agreed transaction details, including any necessary additional import and export control information.
In the absence of a formally negotiated and agreed sales contract, pro forma invoices and commercial invoices are part of the written record containing the contract between the buyer and the seller. Check out the free webinar, create an international sales contract, and learn more details about the Battle of Forms.
3. How to use them
As mentioned above, buyers and sellers use pro forma invoices to negotiate prices and terms of sale. The buyer can also use it to obtain any necessary import licenses, overcome any potential import restrictions and arrange a letter of credit or some other payment process.
Commercial invoices are not only a collection tool, they are also used by customs agencies to determine appropriate duties, taxes and other import charges and to ensure compliance with export requirements. It also provides the necessary information to transfer the goods from the seller to the buyer.
