What is a Proforma Invoice?
A Proforma Invoice is a preliminary bill of sale sent to buyers before goods or services are delivered. It outlines the goods or services being provided, their estimated costs, and other transaction details, but it is not an official invoice. Unlike regular invoices, a proforma invoice is typically issued for informational purposes and does not demand payment. It is often used for customs or to provide a quote for the buyer before the final invoice is issued.
What must a Proforma Invoice contain?
Basic Elements:
Document title: "Proforma Invoice"
Invoice number: A unique sequential number.
Date of issue: The date the proforma invoice is issued.
Seller details: Business name or personal name, address, VAT registration number (if applicable).
Buyer details: Business name or personal name, address, VAT registration number (if applicable).
Description of goods/services: List the products or services being sold, including quantities, unit prices (excluding VAT), total estimated value (before VAT).
VAT information (if applicable): State whether VAT is included or not, and if applicable, the VAT rate.
Total amount: The total estimated cost (including VAT if applicable).
Payment terms: Indicate payment methods or terms, though no actual payment is requested at this stage.
Statement: A proforma invoice must clearly state that it is a "Proforma Invoice", and it should indicate that it is not a demand for payment but rather an estimate.
When is a Proforma Invoice issued?
A Proforma Invoice is issued:
When providing an estimate or quote for goods or services before the final invoice is issued.
In situations where a buyer needs to submit documents for customs clearance or import/export purposes.
For advance payments, where the buyer is expected to make a prepayment before the final invoice.
For pre-sales agreements or when goods/services are being prepared for shipment.
For business transactions in industries that require detailed quotes for budgeting or planning purposes.
Remember:
A proforma invoice is not a demand for payment, so ensure to include clear notes indicating it is just an estimate.
Always specify estimated shipping or handling charges, as these can significantly affect the total cost.
If VAT is applicable, indicate the estimated VAT amount.
Include a unique invoice number to track the transaction for record-keeping purposes.