Invoices can come in all sorts of sizes, including the proforma invoice. Read on to discover precisely what these documents are, and why they differ from a standard invoice.
Proforma invoice meaning
A proforma invoice is an invoice that is sent before the work it outlines has been delivered. Proforma, meaning “as a matter of form” in Latin, refers to the fact that a proforma invoice is not a true invoice, it is just another step in the process, especially in the case of international trade.
What does a proforma invoice do?
A proforma invoice is a sort of preliminary bill that is sent before the shipping and delivery of goods. Usually, shipping charges and the weight of the items are also included on a proforma invoice, meaning all information required by customs on international shipments is readily available. This makes proforma invoices very useful for global shipping and trade. Beyond imported goods, a proforma invoice is also a useful piece of paperwork, ensuring everyone is up to date and fully informed of what has been produced and what they expect to be delivered, as well as what they expect to pay.
Is a proforma invoice the same as an invoice?
No, a final invoice is different to a proforma invoice, meaning a proforma invoice cannot be used in your accounting cycle the way a standard invoice can. A regular invoice is a request for payment, whereas a proforma invoice is simply a consolidation of key information up to the point that the ordered work is delivered.
A proforma invoice has no set template, and can follow the same structure of your normal invoices, but it must state that it is a proforma invoice and not a final invoice.
What information is needed on a proforma invoice?
Unlike a standard invoice, a proforma invoice doesn’t need to have extensive details about the order. For example, a standard invoice would include details of the buyer, seller, PO number, location of the purchase, etc. A proforma invoice only needs enough information to outline the total order, i.e., total cost and quantity.
Proforma invoices and late payments
Some businesses may use a proforma invoice to help guard against late payment. In this way, a proforma invoice is an advance warning of the real invoice, giving clients time to prepare. While this isn’t guaranteed to eliminate overdue invoices, you might want to include proforma invoices in your financial processes for better customer communications.
If you do use a proforma invoice, you must aim to send your actual invoice within 120 days.
What’s the difference between a proforma invoice and a quote?
A proforma invoice is given to customers once they have started the purchase process but have not yet received their goods. You will have agreed an order with your client and have these details to add to your proforma invoice. A quote is given to a customer who has not yet committed to buying anything, but is enquiring how much it might cost to do so. Quotes don’t necessarily need 100% accurate prices as there is still room for negotiations and changes in the request.
We can help
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