What is a proforma invoice. Use cases and best practices

What is a pro forma invoice?

A proforma invoice is essentially a preliminary sales invoice. This document Outline the intention of a seller to deliver certain products or services to the customer, for a specific price.

The firm agreement is what differentiates a proforma invoice from a real invoice, because in the proforma the price has not yet been agreed.

What are your advantages?

Companies that know what a proforma invoice is and are accustomed to using them, take advantage of some of its main benefits, as the following five:

1. They are helpful if you do not have all the details of a commercial invoice, e.g. before the goods are delivered.
2. Can they be sent to declare the value of the goods at customs?, for a smooth delivery process.
3. They constitute a demonstration of the seller's good faith, and while they are not a demand or a request for payment, they allow the customer to know what to expect.
4. They facilitate the internal approval process for purchases.
5. Streamline the sales process Since, when the customer accepts the price on the proforma invoice and the goods are delivered, there is no going back and it is presumed that both parties agree to the terms of the sale.

What are the best practices for its management?

Given that a proforma invoice is a quotation rather than a confirmation of a sale, the terms are subject to change before the final invoice. That is also the reason why in a balance sheet a proforma invoice is not registered, as it is not a real invoice.

However, buyers can still follow best practices when it comes to managing proforma invoices, The following recommendations should be taken into account in particular:

• While the proforma invoice is subject to change, the data it contains should be as close as possible to the actual sales data.
• It is important that proforma invoices contain information that is transferable for creating other documents, such as a commercial invoice.
• It is worth noting the date of the pro forma invoice, as certain variables, such as material costs, international tariffs, and exchange rates, are continually fluctuating, which could lead to an increase in prices that should be taken into account.

Do you know what a proforma invoice is yet? To find out more about invoicing, this article explains how and when it is possible to issue invoices without VAT.