We all are well aware with the word “Invoice” and we use this very frequently in our daily lives. Basically it’s an agreement between two parties like sellers and buyers to sell or buy things against a certain amount of money. The invoice contains necessary information like client address, name, and detail list of items or services rendered. According to market practice of industry, which vary from market to market and even country to country, but sole purpose of the invoice is the same. Invoice is a type of declaration, which shows how much money paid or need to be paid by the buyer or seller against the goods or services rendered. 

There are different types of Invoices; Which are commonly used or known in the different industries. 

Recurring Invoices

Standard format Invoices

Pro-forma Invoices

Progress Invoices

Pending Invoices

Commercial Invoices 

Now we will discuss these types of invoices briefly, but if you are familiar with these you can skip and move directly to relevant part. This article contents are for beginners as well as for the experts. 

Some of the commonly used invoices types are mentioned below;

Recurring Invoices:

These are the invoices, which are being issued by the seller and buyers where fixed amount is involved. Both the parties are agreed on the fixed amount and buyer or consumer have to pay after the benefit is taken. The best example for this car or house on rent. 

Standard format Invoices:

Well, there’s no such invoice with this name in this industry. It is just a layman language word just to differentiate the invoices. These are invoices which are used by the buyers and sellers on account of goods or services rendered. These types of invoices are commonly used by the small business owner. 

This type of invoice includes, complete details of client like address, contact number, email address, unique reference number, goods or services rendered on date, amount, balance or amount paid as advance and also the description of goods. The description of goods also includes quantity, type and reference number of the products. 

Pro-forma Invoices:

These types of invoices are used between the parties where commitments are involved. In this, seller commits with the buyer to deliver certain goods or services within an agreed timeline. 

Proforma invoice is not a compulsory or promise to pay documents, the sole purpose of the document is to deliver order in time and it is also used to evaluate the prices of the product by Govt. authorities. 

Sample template is attached below; 

Progress Invoices:

According to Nina Lacy stated in her article that progress invoices are also known as progress billings. 

Progress invoices are mostly used, where invoices are generated and directly proportional to work in progress. It means, both the parties’ sellers and buyers agreed and give their consent on the committed amount. Buyer or consumer make payments in bits and pieces according to timeline and on the basis of progress of work. 

These invoices are commonly used in the construction sector, where all the payments are made after determining and evaluation of work completed. In these kind of invoices, completion of work determine and mentioned in percentage and this fact is also mentioned on Pro-forma invoice. 

If you find this information irrelevant then skip it and move to next section according to your need. 

Pending Invoices:

Pending invoices are those which are pending in terms of payments or schedule in future dates to be processed. All the contents and description were added in the pending invoice as mentioned earlier in the standard format invoice. 

According to Mr. Matt Nish, pending invoices contains outstanding, overdue, pending and total amount paid details in the invoices. Below screenshot is the best example of Mr. Nish illustration.

Commercial Invoices:

Now here comes the “Commercial Invoice”. Commercial invoice is a key document which is required and recognized globally and mostly used in the import and export of the goods. No exporter or merchant can work properly, if commercial invoice is not issued or available with the shipping documents. Commercial invoice is considered as the vital instruments which is deemed to be necessary for payment and clarification for the goods. This invoice is so much important during the trade that, without this document your shipment will not be cleared from port or custom department. The main purpose of the invoice is to evaluate and consider the actual prices, quantity and type of the goods. 

Well! In simple words you can say that, it’s a document which empowers the seller to claim amount against the goods or products he shipped. 

Commercial invoice information are also used by the custom and Govt. departments to estimate or evaluate the actual duties and taxes of the goods according to description. 

So, basically, the commercial invoice identifies the goods or services provided by the seller and claiming the amount due against these goods through this commercial invoice. You can also say that commercial invoice does not grant or permits ownership of the goods or products until it is supported and backed by the evidence of the payments voucher of the all amount. Second, important factor is that, commercial invoice must be accepted by the importer, means importer consent is compulsory. Therefore, it is always advisable for the buyer to confirm the complete details which he needs to make payments in future at the time of shipment received. 

Commercial invoices are complex in nature than the shipping invoices. Usually, shipping invoices are domestically used, whereas commercial invoices used in foreign trade. But both, shipping invoice and commercial invoice can be used for legal purposes. 

Importance of Commercial Invoice:

Now let’s discuss the importance of commercial invoice, which commonly used for foreign trade. 

Transaction Evidence:

Commercial invoices are used as evidence of sale or any transaction. As it is a legal document, therefore buyer cannot deny this document. If buyer didn’t accept or deny this document, then the seller gets the payment through legal banking system. The most importantly the buyer can be blacklisted means he cannot trade in the future with such company or bank. Once it is generated it is acknowledged by the buyer, therefore without any concrete reason, the buyer cannot deny it. 

Checking of Accuracy:

One most important benefit of the commercial invoice is that, it contains all the necessary information, which is helpful in verifying the accuracy of the goods, which is ordered by the buyer. In simple words, Buyer can easily verify the contents of the goods which he has ordered. 

Pending Payment Notice:

Commercial invoices can also be used as notice for pending payments. Seller bank or seller can directly send these invoices to buyers in case payments are due at buyers end and can also claim it. Usually, financial institutions like banks and trading houses make payments on behalf of the buyer. Because direct trading is usually not allowed between the countries, therefore banks or registered trading houses act on behalf of the their customers. 

Currently, after selection of the goods and after placement of the order, seller and buy both contacted their banks to act as guarantor and ensure security of the payments on behalf of their customer whether they are exporting or importing something. 

Prevention of Exploitation:

The most important benefit of the commercial invoice is that, its safeguard the merchants from getting exploit. The details, nature and description mentioned on the commercial invoice restricts and expose the fraudster.

Payment Assurance:

Just want to make one thing clear, the commercial invoice is not a payment instrument, means you can get payment if you present this document. But it helps you in getting payment assurance when the matter is taken up through legally. You can say that, this document is important when you are going to claim your payment. 

Record Keeping:

Commercial invoice is just not used for trading but it is also very helpful in keeping your record straight and clear. With the unique reference number, you will be able to manage your record easily. 

Duties and Taxes:

Commercial invoices are considered as the authentic document therefore this document is used for calculation of duties and taxes on the imported or exported products according to the details and description mentioned on the commercial invoice. 

Insurance Claims:

Commercial invoices plays a vital role in claiming the insurance claim from the insurance companies. The insurance companies can validate and estimate the loss of shipment in case of any disaster.

Difference between Commercial Invoice and Pro-forma Invoice:

When we are talking about the commercial invoice, then most of the people get confused with the other type i.e., Pro-forma invoice. Some people think both invoices as the same, but actually they are different. Contents of the invoice may be same but there is a difference in them. Like, when buyer shows interest in purchasing a particular product, the buyer gives consent and show his agreement, the seller generates a Pro-forma invoice, which is accepted by the buyer. After that, the buyer contacted his bank to open letter of credit or purchase order. Before processing of the letter of credit or Pro-forma invoice, the seller sends the Pro-forma invoice to the buyer. Buyer requests for opening of letter of credit on the basis of this document. 

So, you can say that, Proforma invoice is an agreement of commitment, that buyer will make payments against this invoice. After processing of the letter of credit, the seller sends the shipment on which he agreed to sell. At the time of shipment of goods, the seller generates Commercial invoice and send it to buyer’s bank. After receiving the goods from seller, the buyer’s bank make payments to seller banks. Well! You can say that commercial invoice is generated to record the receivable of the seller and payable for the buyer. 

The terminology which is also very common stated as “Shipping Invoice”. Well specifically in US and other countries, shipping invoices are used between the trades of provinces or stated. Shipping invoices pattern and contents are similar to the simple invoices. If you say in simple words, the information mentioned in the invoices are not in details. 

Whereas, in the commercial invoices, information are complex. You will see the contents of commercial invoices in details in this article. If you find this information irrelevant, please skip this part and move to content details of commercial invoice. 

Contents of the Commercial Invoices:

In this, we will discuss contents of the commercial invoices in detail;

First comes the “Invoice Information”;

In this, you will see the commercial invoice information. 

Then you will see “Invoice Number”; 

Every commercial invoice has a number, and it is unique in nature. This number was generated by the seller. 

Then you will “Invoice Date”:

In this portion, invoice date is mentioned, on which commercial invoice is generated.

“Order Number”:

Then comes the order number of the goods, which differentiate the customer by this order number. It is also supposed to be unique. 

“Shipper’s Information”:

This portion of the commercial invoice contains information regarding information of shipper, which is supposed to be seller.

Name:

Seller name will be mentioned in this column.

Address:

The complete and detailed address of the seller will be mentioned and it should also include zip or postal code along with the city name. 

Contact Number: 

Sender or seller contact number will be mentioned along with the other details 

Fax:

Fax number of the seller or sender will be mentioned here. 

VAT Number: 

This is used and detail of seller or sender mentioned, where Value Added Tax is applicable. 

Country:

The seller or country name is mentioned in this area.

Receiver’s Information:

In this area, receiver or buyer details are mentioned. 

Name: 

Just like sender, buyer complete name is mentioned. 

Address:

Complete address of the buyer is mentioned along with the zip and postal code and city name. 

Telephone:

Contact number of the receiver is mentioned in this area. 

Fax:

Fax number of the receiver is mentioned in this portion.

VAT Number:

Receiver Value Added Tax Number of the receiver need to be mentioned where applicable. 

Country:

Detail of the receiver / buyer name is mentioned in this portion. 

Third Party Details: 

Then comes the information of the party, who is responsible and affects the delivery of products.

Address:

Complete address of the party need to mention here, who will be notified.

Information regarding Shipping:

In this portion, you have to mention complete and description of the goods along with the quantity and type that seller is going to send.

AWB Number: 

AWB means The Air Way bill number through which you have booked your goods or products for the buyer and customer to identify easily. 

Forwarding Agent: 

Every sender or shipper have to mention details of forwarding agent through which seller is sending the goods.

Date of Export:

The date on which the goods are shipped is mentioned.

Payment Mode:

Payment mode of the shipping is mentioned here, whether it is prepaid, collect, or free. This information must be clear as vague or ambiguous method cannot be mentioned. 

Information regarding Shipment:

This is information which needs to be precise and should be in detail format. Without it, your shipment documents will not be processed at the port by the Govt. or custom departments. 

Number of Pieces: 

Total number or quantity of the shipment mentioned in this portion of the form.

Specification of the Commodities:

Second important information regarding nature and description of the products is mentioned, which seller is going to send. 

Wt (Weight): 

The gross weight of the each and every product is mentioned. 

Qty (Quantity):

Total number of goods in units are mentioned here. 

Unit Price:

Unit price of each product or item is mentioned. 

Amount:

Important information which is inputted is the total amount of shipment is mentioned here, which will be considered as the claimed amount. 

Total Weight:

Total weight of the products is mentioned. 

Currency:

Currency, in which pricing is estimated. 

Total Amount:

The total gross value of the shipment is mentioned. 

Country Of Origin:

Detail of the country is mentioned here, where goods details were manufactured. 

In the last, name of the sender and along with his signature and stamps were embossed on the commercial invoice.

Name: 

The name of the shipper. 

Signature:

The signature and company stamp of the seller.

Below is the screenshot of the commercial invoice sample.

Sample template of Commercial Invoice;

In the above article, we have briefly discussed types of invoices and detail content of the commercial invoices, which includes importance of commercial invoice, difference between Pro-forma invoice and shipping invoice. Contents of the commercial invoice are mentioned in detail and elaborated form. 

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