![]() To satisfy the customs requirements of both countries, the company issues a pro forma invoice and sends it with the shipment. ![]() The company allows the German hospital to pay for the equipment on delivery. Customs officials use the information on the pro forma invoice to assess the value of the goods and calculate what duties or taxes may be due.Įxample: A company receives an order to supply medical equipment to a hospital overseas in Germany. A pro forma invoice can serve this purpose. When shipping goods overseas, customs officials on both sides of the border require detailed information about the goods, whether the buyer has paid for them or not. People and businesses frequently use pro forma invoices instead of commercial invoices for customs purposes on unsold goods. Pro forma invoices can serve various purposes, including: Pro forma invoices for customs Related: How to create an invoice for services in 5 simple steps What are the uses of a pro forma invoice? Having to account for unexpected currency fluctuations When the buyer and seller agree to different payment terms Circumstances that may result in price changes include: ![]() In many cases, the price stated on a pro forma invoice is the same as the commercial invoice price, but there are times when the price may change. Pro forma invoices aren't for requesting payment and aren't necessary for all transactions. Much of the information on a pro forma invoice is the same as a commercial invoice, but they serve a different purpose. services: definitions and key differences What is a pro forma invoice?Ī pro forma invoice is documentation of commitment to provide goods or services at an agreed-upon price. Vendors and service providers may issue a pro forma invoice under the assumption of receiving payment once they have delivered goods or services. Pro forma documentation assumes a future event, such as a sale or the completion of services. Pro forma, or proforma, is a Latin phrase which directly translates to for the sake of form or as a matter of form. Understanding the pro forma definition can be useful in business. Related: A guide to small business accounting (the basics) Pro forma definition In this article, we provide a pro forma definition, explain pro forma invoices, look at when to use them, answer some frequently asked questions and provide a template of what to include in this type of invoice. Pro forma invoices provide documentation connected to business transactions for official and legal purposes. Companies and individuals who send and receive goods overseas and those who provide services before payment may encounter a pro forma invoice. At the end of the job you can also quickly convert the estimate into an invoice.In business, pro forma refers to financial documents such as invoices, balance sheets and income statements prepared before a specified event. Creating an estimate workflowįreeAgent's estimates functionality enables you to customise estimates from a choice of templates, send them to clients by email, and track whether they are approved or rejected. In other words, you don't have to supply the goods or services at that price whereas with a quote or quotation, you do. It's important to remember that a proforma invoice (just like an estimate) is not binding on your business. Your customer can't use a proforma invoice to reclaim any VAT. You might draw up a proforma invoice as a temporary document so that your customer has some idea of how much they can expect to pay.Ī proforma invoice is a management document only, so it wouldn't be added to your accounts and the invoice amount won't appear as part of your sales or your debtors. When you're in the process of negotiating a sale, you might not know exactly how much you're going to charge your customer or exactly what they're going to buy from you. ![]() What is a proforma invoice? Definition of proforma invoiceĪ proforma invoice, which may also be written "pro forma invoice", is a document that you might issue to a customer before you know all the facts about the sale.
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