Proforma Invoices: Purpose, Differences, and Payment Process

what is a proforma invoice

A proforma invoice is a starter bill of offer that sends off to the customer before completing work. It’s a pre-delivery commitment to products and services. It keeps the record of work, the amount, and the cost you’re charging for the items or services. It is a legal document and a commercial quotation of a specific commercial transaction.  

Nor can your customers utilize proforma for accounting purposes. Consider a proforma invoice as a standard invoice for customs purposes on imports. Many countries use commercial invoices to control imports.

This article covers: 

What Is a Proforma Invoice? 

Proforma applies to invoices that are still in the process. It implies that the invoices don’t have an invoice number compulsory for every legitimate invoice.

In contrast to an invoice, a proforma invoice is a statement that highlights the products and services that a seller focuses on selling.

Proforma invoice sends before the completion of work, including the delivery of products. Shows agreement between seller and buyer about the pricing of goods and services. 

What’s the Purpose of a Proforma Invoice? 

The purpose of a proforma invoice is to carry out a smooth business cycle. When you send the proforma invoice, the client consents to the cost, and afterwards, you provide the products or services. 

Rather than waiting for an instalment, proforma invoices tell the client what to expect exactly. 

Other uses of the proforma invoice are:

  • It sends off to disclose the value of products for customs for a quick and easy delivery process. 
  • A Proforma invoice is best in a case when you don’t need details, just like a typical business invoice. 
  • A few customers use it for the internal purchase approval process. 

Imports and trade exchanges readily use proforma invoices. 

What Is the Difference Between an Invoice and Proforma Invoice? 

An invoice is a business instrument that expresses the aggregate of the due amount. The seller sends the proforma invoice to the customer to provide items and services on a particular date and time. 

An invoice is a business instrument that confirms the sales and requests for payments from the customers. A Proforma invoice is a statement for a customer before billing is complete. It gives the details of the products and services before delivery. 
The right time for issuing an invoice is before the completion of payment. The right time for issuing a proforma invoice is before the placement of an order.
The goal is to let the purchaser know about the due amount for products and services. It’s legitimately official. To let the purchaser know what to expect. 
A regular invoice should include the logo, contact data, billing addresses, data, payment terms, and conditions.A proforma invoice should incorporate all the data a standard invoice includes under the name “Proforma.” 
A business invoice is fundamental for billing processes. It should keep references and your accounting data in case of an audit.It gives your business an overall view of billing details. Proforma invoices are not for bookkeeping purposes. 

Would payment be able to Be Made on a Proforma Invoice? 

The proforma invoice, let the customer give advance payment against an actual invoice. It makes the invoice more clear about what and how much amount it owes. 

You must add the proforma invoice number on the actual invoice to avoid re-payment by the customer. You can also create a custom proforma invoice template for dealing with potential clients.

What Is a Preliminary Invoice? 

Proforma invoices are primer invoices that educate customers about the terms of payment regarding the deal in the sales process.

The primer invoices are made for inside checking invoices or for empowering clients to check their invoices. The accounts receivable and accounts payable do not include invoices. 

The proforma invoice ensures timely payment by the clients. It helps to calculate the profit of the business by the end of a year.

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