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Proforma invoice meaning and templates

How many times have you bought something maybe online only for it to arrive and now you have to pay a little more than you expected? This usually happens if shipping is involved. I know this sucks. Like you had planned to buy stock for your electronics shop, you agree on the price with the seller only for the goods to arrive and the invoice being sent is a bit more pricey than you expected. Do you know how you can avoid this? Well, I do and its through a Proforma invoice.

What is a proforma invoice? How does it help deal with this problem? Proforma is a Latin word for “as a matter of form.” A proforma invoice is a preliminary bill of sale sent to buyers in advance of shipment or delivery of goods. It is an estimated invoice submitted by a seller to the customer prior to shipment or delivery of products. It usually notes the type and quantity of goods, the value of the goods, and other relevant information an example being transport charges and weight. How does it help deal with the problem? It helps in that it comes with a well-calculated price estimate from the seller. The calculated estimate involves all the cost you are likely to incur from the seller and the customs while shipping. It also includes an estimate of any applicable taxes. It represents a good faith estimate. This then helps you save the necessary money and not to make a lousy estimate and end up having less than you needed.

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Advantages of proforma invoice?

There are a couple of reasons why a seller should be issuing this invoice as well as why a buyer of goods should be asking for it. These reasons are:

  • It is ideal in situations where one does not have all the details for a commercial invoice. This then means it stands in for the commercial invoice as the necessary information is looked for in order to issue a commercial one.
  • The proforma is also advantageous because it helps make the delivery process easier and smoother.
  • Another thing that makes them the way to go is that they are good faith agreements. This is in that they paint a picture of what the customer should expect. This is in all the details they hold.
  • Some companies request for a proforma for their internal purchasing approval process.

    • What is the difference between a proforma invoice and a commercial invoice?

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    There are a number of differences between the two. Yes, they both share the name invoice but let that not fool you. What then makes them different?

  • A proforma is used for the creation of sales while a commercial invoice is used for confirmation of sales.
  • The proforma invoice is usually provided by the seller of the goods on the request of the buyer before the placement of the order while the other one is issued by the seller to the buyer of the goods to request for payment of the goods that were delivered.
  • The proforma is more of a quotation and more of an agreement while the commercial invoice is more of a bill.
  • The proforma invoice is used to help the buyer in the decision-making process. It helps him or her to decide whether to make the order or not. The commercial invoice, on the other hand, is used to inform the buyer on the actual amount he or she should pay.

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    Things to keep in mind when creating and sending a proforma invoice

    This is not just something you use just the way you want. There are a couple of things you need to take note of when using this kind of invoice. These are:

  • It is not an actual invoice. Issuing it does not mean the buyer has to pay anything. It is just a document that helps the buyer to make that decision to buy or not to.
  • This type of invoice is not recorded as an account receivable by the seller. This is due to the fact that it is not a true invoice as stated above and hence cannot be labelled as such.
  • It is not recorded as an account payable by the buyer. This is because payment is not expected; hence it is not registered as such.

    • How to create a proforma invoice

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    The proforma is basically your offer to sell. It is what will convince the buyer why he or she should buy the specific good from you. This then makes it an essential document. Here are three things you should always do to make sure you create a correct one.

  • Use the cost sheet to calculate export costs.
  • Determine the acceptable price for the material you are selling.
  • Make sure you cover all things that are important or might be relevant to the customer.

    • Proforma invoice sample

    Shown below are two examples of proforma invoices. The pictures show how they look and what details they contain.

    The first proforma sample contains: a header with the name proforma on it, the company’s name and slogan, date, invoice no, Bill to and ship to details, the full description of items, no of items, unit value, total value, name and address of the supplier, reason for export, harmonized tariff, country of manufacture, name and signature.

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    The sample below is a bit different from the first one. This second one contains: the company name and slogan, customer information, ship to, shipping details, part number, unit measure, description of items, quantity of goods, unit price, tax, the total amount, terms of sale and other comments and additional details.

    That is what a proforma invoice is. Have you ever requested one? Have you ever handled one in your life? If so, what were the goods you were buying and was the price estimate almost the same to what you ended up paying for? Leave your views about this in our comments section.

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    Source: TUKO.co.ke

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