A Pro-forma invoice is a document sent by the seller to the buyer in advance of the shipment or delivery of goods. They are mainly used as preliminary invoices with a quotation or for customs purposes in importation.
They do not demand or request for payments from the buyer. It has a unique Pro-forma invoice number and the date in which it was prepared. It also includes the proposed terms of sale and payments. The grand total and if in any case the certificate of importation is required on the imported goods.
Pros of Pro-Forma Invoice
- They are ideal if you do not have all the details for a commercial invoice
If the commercial invoice is not there then the Pro-forma invoice will be of great importance as it will still be used as the commercial invoice. It will contain the grand totals of the commodity and hence the buyer will know the amount of money he or she is supposed to pay.
- They declare the value of goods
Pro-forma invoices are used to declare the value of the goods for customs for a smooth delivery process. The buyer will be in a position to know the value of goods that he or she is to receive.
- They serve as the agreement for the customer to know they expect
As opposed to commercial invoices, proforma invoices are not used to demand payments of commodities. They are used to serve as an agreement to show the customer what they expect to receive.
- They are useful for the internal purchasing approval process
When the seller sends the Pro-forma invoice it is used for purchasing approval process whereby the buyer will have to confirm if the goods sent are the ones that were packed.
Cons of Pro-Forma Invoice
- It is only a prediction
The Pro-forma invoice only gives a prediction and sometimes it may not really be the exact thing. When it is accompanied can really affect the company’s finances if someone is not in one area or all the areas to approve it.
- The goods may be ordered differently
When the goods are ordered differently and in different quantities, it may be a problem for someone to approve the details on the proforma invoice hence it is not really the best document to accompany the goods.
- The signature from the seller’s company can be a fraud
When the seller really wants to sell the goods to the buyer and yet there is no one to sign, there can be fraud whereby anyone can append the signature which may eventually cause problems after the goods have been released.
- The preferred method of payment may sometimes not be found in the buyer’s country
The seller can prefer a certain means of payment which may not really be found in the buyer’s country and this can cause a delay in payment after the receipt of goods which may affect the running of the company.
Pro-forma invoices are good in that they assist the buyer to make plans for payment on goods and how to pay for them. It also assists the buyer to know the documents that will be needed in order to make clearance on the goods so many importers prefer using the Pro-forma invoice.