What is Proforma Invoice?
Proforma invoice is an estimated invoice prepared before a sales transaction and presented to the buyer. It is not a final sales invoice and has limited legal binding. It is used as a quotation document in international trade. It includes product description, price, quantity, and payment terms.
Proforma invoice is required for the importers banking transactions, letter of credit application, and import permits. It constitutes an official offer and when accepted forms the basis of the sales contract. It is also a reference document for the exporter in production and shipment planning.
What Should Be Included in Proforma Invoice
Seller and buyer information should be written in detail. Company names, addresses, tax numbers, and contact information should be included. Invoice number and date are important for document tracking.
Product information should be comprehensive. Product description, HS code (harmonized system code), unit price, quantity, and total amount are written. Currency should be clearly specified. Packaging and label information can also be included.
Commercial terms should be clear. Delivery terms (Incoterms), payment conditions, and validity period are specified. Shipment information, estimated delivery date, and mode of transport are added.
Steps to Prepare Proforma Invoice
Evaluate buyer request and check product availability. Calculate costs for pricing. Consider freight, insurance, and customs costs. Determine sales price by adding profit margin.
Use professional format on company letterhead. Check accuracy of all information. Prepare in PDF format and send to buyer. Changes can be made until accepted.
Differences Between Proforma and Commercial Invoice
Proforma invoice is a pre-sale offer and does not require accounting record. Commercial invoice is a final sales document and carries legal obligations. Commercial invoice is used in customs procedures.
Amounts written on proforma invoice are estimated and may change. Amounts on commercial invoice are final and payment is made on these amounts. Consistency of both documents is important.
Uses of Proforma Invoice
Bank refers to proforma invoice when opening letter of credit. It is used in import license and permit applications. It is submitted when central bank approval is required for currency transfer.
Shipping companies request proforma invoice to calculate cargo fee. It is used as reference in issuing insurance policy. It is also useful for customs pre-assessment.
Points to Consider
Price validity period should be clearly stated. Currency fluctuations can affect price. Clear writing of offer conditions prevents disputes. Signature and stamp increase official nature of the document.
Conclusion
Proforma invoice is one of the fundamental documents of international trade. Professional preparation and complete information build trust. Correct proforma invoice is the first step of successful export transaction.