Pro Forma Invoice. MarketCheese

A pro forma invoice – is a document established between a seller and buyer on the order that has been made. Also, it can be called an initial bill of sale. The seller creates this invoice and sends it to the customer prior to the payment and/or delivery of the chosen goods or services. However, sometimes the order can be paid in part or in whole before the delivery. It depends on the situation.

This document is important for importing goods through customs. It consists of the essential information about the imported products. This document was designed for modernization of the delivery process. Now all of the needed information is arranged between the both sides beforehand.

Pro Forma Invoice characteristics

The pro forma invoice doesn’t have a standardized form, thereby it can be similar to commercial invoices and dissimilar to other pro forma invoices. Though there is no standardized form for this document, it has its own peculiarities.

This document must define goods sufficient enough for the delivery passing the customs. Also, it should represent a precise price of the order, including not only the price of the items itself, but all the supposed commissions and/or other additional costs, e.g., transportation expenses, customs duties, etc. The buyer shouldn’t be surprised by the total sum of the order or some other details stated later in the commercial invoice. Only small price variations are appropriate between these documents.

Overall, the pro forma invoice can, but isn’t required to, record the following features of the buyer’s order:

full name and address of the buyer and seller;
list of the ordered items;
amount of the chosen items and their characteristics (e.g., items’ weight and dimensions);
price of each item and the total sum of the order;
additional expenses such as delivery and customs fees;
discounts and/or special conditions, if there are some;
payment terms;
delivery date;
etc.

In spite of a non standardized form, this document is an official arrangement between the buyer and seller. However, some details of this arrangement can be changed under the buyer’s agreement. Also, this invoice can be sent before the delivery of the order or with it.

Note that if deliverables are imported to the USA, the commercial invoice has to be presented after the pro forma invoice within not less than 120 days.

Differences between a Pro Forma Invoice and commercial invoice

The pro forma invoice is not equal to the commercial invoice. Opposed to the latter, the first invoice doesn’t require the seller to list all the needed information about the order such as the description and quantity of the delivered goods, etc. The pro forma invoice can contain this information, but isn’t required to. That is one of the main differences between these documents.

The pro forma invoice doesn’t have a power to demand a payment in comparison to the commercial invoice. Basically, this document is aimed to inform the buyer about the ordered goods or services and the final price of the order. Also, this document allows the delivery to come through the customs.

Example

For example, as a US resident you order some clothes from Italy. The shop policy requires clients to pay 50% of the order in advance. After receiving the prepayment the seller creates the pro forma invoice where the relevant information on the order is established. Also, the document reflects the final price of the order which is $350 including the delivery and custom expenses. You have to pay the remainder after receiving the items. Then the seller creates the commercial invoice. Considering that the order is delivered to the USA, the commercial invoice must be presented.