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2018-07-18 09:13:38FinanceEnglishLearn what a pro forma invoice is and when one is typically used. Pro forma invoices are binding documents. So it's a good idea to use them... is A Proforma Invoice?

What is A Proforma Invoice?

1 min read

If you ship goods to customers, you may sometimes have to prepare a pro forma invoice, which outlines your intent to provide specific products or services at a price to be agreed upon. Think of it as an estimate or a quote, but with a big difference — Once your customer accepts the pro forma invoice, it acts as a binding contract.

Pro forma invoices are often used to declare the value of purchases as they go through customs. This helps ensure a simple, smooth shipping process between countries. It’s also common for businesses to use per forma invoices as part of their internal purchasing process. For example, if you use cloud-based accounting software, such as QuickBooks Online, you can send a pro forma invoice to your client electronically. Once the client approves the transaction, the software automatically sends an invoice to that customer.

Pay attention to how to format a pro forma invoice by following these steps.

  • Price and sales terms for the deal — the price of the goods and the cost to ship, store, insure, and deliver them
  • Full names and addresses of the seller and buyer
  • The words “pro forma invoice”
  • If the agreement only remains valid until a certain date, include the date
  • A breakdown of each item or service, along with their quantities and any important descriptive features
  • When shipping goods out of the country, the invoice should include the country of origin
  • The payment terms, including the amount of payment, the currency, and a breakdown of any payments and their due dates
  • Your signature — full name and title — and the date

Sending a pro forma invoice isn’t a requirement for all companies. But it’s a good option if you have a service-based business that allows partial payments, if you ship goods to other countries, or if you’re using cloud-based accounting software.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
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