The purpose of this guide to develop understanding about the structure, and use of proforma invoice. It also shed lights on what proforma invoice is and how and where it should be used to have its optimal outcome. This guide is structured in such a way it gives a complete outlook of how a proforma invoice should be developed. It will equip you with such relevant tools that you would be able to develop your own proforma invoice template. 

This guide will also provide two useful templates as an example, so that you can develop your own proforma invoice, while being creative. So, here you go we hope that you would enjoy reading this guide.

Before talking about its use, structure, and nature, let’s shed light on what is proforma invoice?

What is Proforma Invoice?

Proforma Invoice is a preliminary invoice that is sent to buyer before delivery or shipment of goods. It provides information regarding description of items purchased, and other important and relevant information regarding transport charges, and shipping weight etc. It can also be defined as compact form of international sales contract. More precisely, it a lighter version of contract of sales. This invoice is issued by seller, which is also tagged as exporter in the transaction. The structure of this invoice may vary from place to place and continent to continent. That is why this form of invoice does not have a unique form or structure.

According to Global negotiator, proforma invoice is a kind of sample invoice that is provided by exporter/ seller of goods prior to sale, merchandise, or shipment of product/ goods that is issued to inform importer/ buyer of the goods/ product about the details and specification that are relevant to goods/ products.

Now, since we know and have a general idea about what proforma invoice is, let’s discuss about the use of proforma invoice.

Use of Proforma Invoice 

Invoices are the face of your business. You cannot expect your customers to take you seriously, if your invoices does not seem professional. Proforma invoices can be used to leave a strong and lasting impression on your client. Clients can question the originality of the exporter by looking at the structure of proforma invoice. This might end up or create hurdle in the process flow of the proforma invoice. The structure of proforma invoice is so critical for exporter or seller that buyer or importer of the good might initiate the payment process by looking at or by judging the originality or genuineness of the invoice. So, you might like to engage your client or customer by providing a sound looking invoice.

Usually, these invoices are used for custom purposes, when information regarding imported items are required. There are certain documents that are needed at the time when goods or products pass through the platform of customs. A typical commercial invoice must have specific information regarding the seller, the buyer, location of purchase, quantity and value of items being shipped. However, a proforma invoice only needs particular info that allows customs to examine included goods generally. The information on proforma invoice allows customs to determine the taxes and duties levied on the import. If a business issues proforma invoice for customs, then it is expected to produce commercial invoice within 120 days.

This description might look like a simple price quotation to you, but that is not the case. Prof roma invoice is somewhat different from simple price quotations. It is a kind of a binding agreement, in which terms of sales are subject to future changes. Almost all business use proforma invoices to deal with the process of internal purchasing-approval.

Since, now we have good idea about the use of proforma invoice, let’s discuss about structure/ important elements of proforma invoice.

Structure of Proforma Invoice

In most of the cases, proforma invoices contains a precise sale price of the product or services that has been acquired by the buyer. This cost usually includes fees, taxes, shipping costs, and commissions, if any. However, these prices and estimates are subject to any future changes. Usually, these invoices are used in good faith, to inform buyer about all the significant charges, so things do not get messy in the final stages of the transactions. These invoices can be sent with agreed-upon shipped items or deliverables. Even though exact cost details are given in the proforma invoice, but still it does not have official standing of demand for payment. A business can also use a proforma invoice, if it is specified in the sales contract that full and final payments are not due until goods or products or services is delivered to the buyer or acquirer. You can understand the case of proforma invoice with this example. For instance, a bakery cake customer agrees upon on the price written on the proforma invoice. The bakery owner will deliver the cake once it is ready, and customer will make payment once the delivery is made by the bakery.

As far as proforma invoice template is concerned there is no specific format or dictating guidelines to form these invoices. These invoices can or cannot resemble with commercial or traditional invoices.

Usually, exporters conveys or defines some definite features to importers. In most of the cases, proforma invoices mainly have these following features:

The Description of Goods

The Price of Goods

Delivery Items

Quantity of Goods (with appropriate Measurement unit)

Quality of Goods

Packaging

Terms and Conditions of Delivery

The period of Delivery

Mode of Payment

Mode of Transportation

As we have pointed out the key elements of proforma invoice, it is the right time to discuss about the process flow of the same.

Process Flow of Proforma Invoice

This section deals the process flow of proforma invoice. It elaborates how and when a proforma invoice is issued. It also highlights the important elements of the invoice that should be added in the basic structure.

In the above image (inspired by the design of Vectezzy), process flow for proforma invoice has been given. It explains a mechanism by which exporter of the goods issues a proforma invoice to importer of the goods on his demand.

Any transaction will take place after process of negotiation between importer and exporter takes place. To purchase any good, importer will show its buying intent to exporter. After negotiating on particular terms and conditions, and upon reaching on certain agreement, Importer demands a proforma invoice from an exporter. In this invoice, importer would be able to see all relevant details of the transaction. While acting upon on this request, exporter will prepare, and sends the proforma invoice to the importer. Finally, at the last phase of the process flow, and upon receiving proforma invoice, and after reading the terms and conditions carefully, importer will sign it and sends it back to the exporter, to show its positive intent about proceeding the transaction. This is a formal approach to confirm the status of the transaction. Since, now we know how and why proforma invoice is issued, it is the optimal stage to explicate the structure/ features/ elements of the proforma invoice. A particular proforma invoice should include these elements to have professionalism in it. You should include all these elements to structure your invoice to leave a long lasting and impressive impact on the psychological being of your client.

Below, elements that are important for the preparation of proforma invoice is given. 

Preparation of Proforma Invoice

As mentioned earlier, there is no specific format for proforma invoice. However, this guide will mention some core ingredients that should be included in any proforma invoice. 

Elements of Proforma Invoice

Important elements of proforma is listed down. Try to consider all these elements before designing your own proforma invoice. 

Relevant Details of Consigner (Logo of the Brand/ Company/ Service Provider/ Name of Consigner, etc.) 

Name of the exporter/ exporting company/ seller name along with all other details must be written on the proforma invoice. The complete details; for example company title, phone numbers, address, focal persons, legal reference, and fax number should be written in the proforma invoice. 

For example, below given details should be provided in a proforma invoices. 

ABC Textile Company

Address: 5xx, Street 0x, Washington DC, USA

Contact Number: +56-90821xxxx

Contact Person: Mr. Adams W. Smith

Legal Partners: KLJ Law Associates

FAX Number: 056-5563245213xxxx

Date of Proforma Invoice 

Proforma invoice creation date is one of the core element that should be written on any proforma invoice. Every document should have this information.

Proforma Invoice Serial No.

Serial No. or proforma invoice no. is one of the most important elements. A unique number is assigned to every invoice. This number can be used to refer invoive in the future. You can assign any pattern of numbers to your proforma invoice. Just make sure to assign these invoices a unique number that can be put in order or can be sorted 

Name of the Consignee

Name of the Importer/ Importing Company/ buyer name along with all other details must be written on the proforma invoice. The complete details for example company title, phone numbers, address, focal persons, legal reference, and information regarding value addition tax number should be written in the proforma invoice. 

For example, below given details should be provided in a proforma invoices. 

ABC Textile Company

Address: 5xx, Street 0x, Washington DC, USA

Contact Number: +56-90821xxxx

Contact Person: Mr. Adams W. Smith

Legal Partners: KLJ Law Associates

VAT Number: 1.17 %

Gross and Net Weight, and Amount of the Package 

Gross and net weight of the product or goods, and total amount of the product/ good or service provided are other most important elements of proforma invoice. This information will provide details that are directly relevant to the product or service. This description is also need by customs to proceed further. For example 30 pieces of pallet lifters, 90 carton boxes, weighs around 1000 Kg. 

Details of Goods

Detailed characteristics or specifications of the goods/ product should be mentioned on the proforma invoice. This will help importer to verify the nature and characteristics of the goods. 

Unit Price of The product

The unit price of the product should be mentioned in the proforma invoice. This would give a good idea of about the per unit price of the product. 

Total Amount of the Consignment

Total amount of the consignment that would be incurred to importer should be written on the proforma invoice. This would include total price of the product, taxes and duties imposed by exporter’s country, transportation charges etc. This currency in which the payment will be made must be agreed upon and the total amount of the consignee should be written in that currency. 

Method of Payment

The preferred mode or method of payment should be mentioned in the proforma invoice. The payment mechanism should be defined or chosen and should be mentioned in the proforma invoice to make things clear in the future. This would not only clear terms and conditions between importer and exporter, but it will also help parties to avoid future disputes that may arise due to miscommunication or lack of communication regarding mode of payment. For example, it should be made clear that when cash or amount will be paid and how it will be paid, and in which form it would be paid. The preferred mode amongst cash after delivery of goods/ before delivery of goods, letter of credit, partial/ full advance payment, cash against documents, or bank payment obligation, etc. should be made clear and written in proforma invoice. 

Required Time of Loading 

This is another important element which indicates how much time goods or products will take to load. For example, goods will be shipped or transported one week after 50 percent of the total payment has been paid, or goods/ products will be dispatched by 23rd week of 2018, etc. 

Name of the Supplier 

Any proforma invoice is incomplete without the name of the supplier. A supplier is also called the exporter of the product. So, exporter name should be mentioned in the proforma invoice. 

Exporter’s Bank Detail

As exporter might be expecting advance payments, in relevance to the agreed upon terms and conditions, so bank details should be provided in the proforma invoice. These details including IBAN number or BIC code (swift address) should be written in invoice.

Validity period of the Proforma Invoice

It is quite obvious that every document has a validity period, but you have to declare the validity date to the importers of the good. As commodity prices are subject to many other factors; like wages, interest, rent, taxes, duties, etc. So, a statement like this proforma invoice is valid until 20/11/2018 or this proforma invoice will remain valid for six weeks after its issuance date.

Delivery Terms and Conditions

According to Shipping solutions, International commercial terms should be communicated and agreed upon by the both of the parties, and these terms and conditions should also be written in these invoices. These International commercial terms should be indicated in reference to the delivery points and corrected rules edition. 

Signatures of Issuing Authority

Finally, a section should be designated for signing authority. So, everything written in the proforma invoice can be authorized. 

Some more elements;

Add-ons

After adding all these elements, you may add some other features to have a distinguishable edge on other competitors. You can add message field and tax identification number in the basic structure of invoice.

Message Field

It’s an allocated space on your proforma invoice to send or express gratitude to your customer/ client. You can also make remarks over the performance of the acquired services. 

Tax Identification Number

Sometimes, businesses have been issued with a unique number. Businesses can mention that tax identification number in the invoice as well. It is good for those firms who have to handle a large volume of invoices on frequent basis. Though, it is not a legal requirement, but It can help you in making sure that your invoices are managed properly, and paid duly by the Importer.

Proforma Invoice Template

Below some of the templates of proforma invoice are given for reference purposes. You can follow this style and pattern, while incorporating all the details for making your invoice. 

Source: Proforma Invoice Template

Source: Proforma Invoice Sample

However, do not forget to show your creativity while following these guidelines. 

Apps and Softwares to Develop Proforma Invoice

There are many software and applications available that can help you in developing your proforma invoice. You can use Sleek Bill, and Debitoor, etc. to make your own proforma invoice. You can also develop your own proforma invoice, while using Microsoft Word, and Microsoft Excel. This will definitely save your money, but it will take more of your time. 

So, that’s it for now. We hope you would like reading this article. Please rate us, and write down your queries to us. We would love to have your responses and comments.