Proforma Invoice

What Is a Proforma Invoice?

Sales transactions involve a lot of back-and-forth negotiations between seller and buyer. Sometimes, it may be difficult to keep track of the final agreement. That’s where pro forma invoices come in.

A proforma invoice also known as a preliminary bill of sale is a document sent by a vendor to a client ahead of a shipment describing the goods to be shipped, their relative costs, shipping weight and transport charges.

It shows the seller’s commitment to provide the products or services at an agreed price and time. Since it is designed to give only the cost estimate of the sale, the figures on it are not final and so might be modified several times.

Unlike a purchase order that is issued by the buyer to the seller, this negotiating instrument is issued by a seller to a buyer.

What Are Pro Forma Invoices Used For?

Although pro forma invoices are closely related to estimates and quotes in function, they are not the same. Unlike the others, pro forma invoices can be converted to a final invoice as soon as everything in them has been delivered or carried out as planned.

The following are some of the most common use cases of pro forma invoices:

• Construction: Dealers in construction materials use pro forma invoices to itemize the materials supplied, labour and billable hours. Using this mode, all the parties involved know the project cost from the beginning.
• Consulting: It is recommended that consultants list and explain in the detail the work they do for each client monthly. The only exception is when there is a retainer agreement.
• Freelancing: For many freelancers, this is a better transactional instrument than a quote or estimate because of how easy it is to convert into a final invoice.

The following are some of the other use cases:

• They are used in export transactions to declare the value of a shipment for customs
• They are used in some companies for internal purchasing approval process
• They can be used in place of a commercial invoice if the details of the commercial invoice are not yet known in detail.

How to Fill Out a Proforma Invoice Template?

• Here’s how to fill out a pro forma invoice template:
• Download a proforma invoice sample or proforma invoice template
• Add the business logo and other branding portfolio
• Enter the business name and contact information in the invoice’s header section
• Create a duplicate copy and enter the client business name and contact information
• Enter a unique invoice number, invoice issue date and payment due date
• Itemize the goods and services provided with a brief description of each of them
• Calculate the total cost of these items and write in bold, clear font at the bottom of the invoice
• Include the business payment terms and other additional information
• As a rule, it must be specified that this is not a VAT invoice
• Share the proforma invoice to your clients via mail or an email

Why Are Pro Forma Templates Important?

As has been proven, pro forma invoices are an essential part of many trade transactions, especially international trades. However, it has to be well formatted for it to be effective and well understood by the main players in the trade. For good formatting and concise details, it is best to use a proforma template.

Here are some other benefits you stand to gain from using proforma invoice templates.

They save time

Proforma invoice templates are an asset when it comes to creating pro forma invoices for repeat customers. They save you time you would have otherwise used to reenter information each time you are dealing with a client.

Proforma invoice templates give you a more professional outlook

Although it is possible to create an invoice from scratch, it will rarely look as professional as those drafted from a proforma invoice template. Using a template with a professional style and business touch gives your business a more professional outlook

They are easily customizable

Since it is a template as opposed to a form, you can easily remove text boxes you do not need, add those you need and edit as many fields as you deem fit

Pro forma invoice templates convert easily

Once the details on the proforma invoice has been agreed upon by the buyer and the services carried out according to this agreement, you may need to convert the proforma invoice into a final invoice. With a proforma invoice template, it is easy to do this. Once you insert the payment instructions and remove the pro forma header, you have a final invoice.

They are easier to draft than DIY

Creating an invoice from scratch can be a little frustrating, especially with regards to style and formatting. An invoice template is an easier way out.