What is a 'Pro-Forma Invoice'
A pro-forma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. Typically, it gives a description of the purchased items and notes the cost along with other important information, such as shipping weight and transport charges. Pro-forma invoices are often used for customs purposes on imports.
BREAKING DOWN 'Pro-Forma Invoice'A pro-forma invoice differs from a simple price quotation in that it is usually considered a binding agreement, despite the fact that, like a price quote, the terms of sale are subject to change. A wide variety of businesses in virtually all industries use pro-forma invoices.
Most pro-forma invoices provide the buyer with a precise sale price. It includes any commissions or fees, such as applicable taxes or shipping costs. Though the pro-forma invoice may be subject to change, it serves as a good faith estimate to avoid exposing the buyer to any unexpected charges once the transaction has fully completed.
A pro-forma invoice may be sent prior to the shipment of any agreed-upon deliverables, or along with the shipped items. While it does contain exact details regarding the costs associated with the sale, it does not serve as an official invoice upon which a payment must be made.
Pro-Forma Invoice Format
There are no guidelines dictating the exact presentation or format a pro-forma invoice must take. As a result, there are variances from one business to another, or from sale to sale. In that regard, the pro-forma invoice may be strikingly similar to or different from other commercial invoices.
Use of Commercial and Pro-Forma Invoices
Generally, if the sale has already been completed, a commercial invoice is used as a record of the sale. In comparison, a pro-forma invoice may be used when a transaction is not officially complete. This can apply to instances where full payment is not due until certain goods are received, as dictated by any other sales contracts between the buyer and seller businesses.
Commercial and Pro-Forma Invoices and U.S. Customs
For items to pass through U.S. customs, certain documentation is required. A traditional commercial invoice requires a large amount of data, including information about both the buyer and seller, descriptions, quantities and values for all items being shipped, and the location of the purchase.
A pro-forma invoice requires significantly less information. This generally must include enough to allow for required duties to be determined and a general examination of the included goods. If a pro-forma invoice is used, a commercial invoice is required to be presented within 120 days.