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?What Is a Proforma Invoice

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What Is a Proforma Invoice?

Proforma invoice is a kind of document for the purchased goods which is issued by the seller for the buyer. By using this document, you can easily receive the information and licenses you need for clearance of goods at customs.

Proforma invoice is one of the first documents issued by the seller to the buyer after negotiation and correspondence and agreement of the parties to the transaction. Sometimes the seller issues his sales offers in a document called a quote to the buyer before sending the proforma invoice and after reading that quote when the seller and buyer reach an agreement the agreed consideration will be written as proforma invoice.

Based on the explanations provided, we found that proforma is a document issued by the seller before the transaction which contains all the agreements between the seller and the buyer.

Proforma invoice is one of the most important documents in customs formalities, correct preparation of proforma invoice reduces the time to do the transaction. The reason for this is that proforma invoice is a basic document for order registration, opening on letter of credit, etc. If the agreed terms are not mentioned precisely in proforma invoice and the letter of credit is opened based on the incomplete proforma invoice you will face problems in clearance of goods and you should amend the document.

You should note that there are some important points you must mention in proforma invoice which we will discuss in following paragraphs. For instance, information such as the name of products, quantity of the products, the price of products, the freight, the determined currency to pay, the country and factory in which the products are produced, specifications of the products, packing, specifications of transportation, and the payment terms are very important to be written in the proforma invoice.

Time of Validity of Proforma Invoice

Proforma invoice is a document in which the price and agreed terms are mentioned. As we said the seller issues this document, we should consider that the seller determines that how long this document is valid and the buyer can take action.  In other words, it should be mentioned how long the terms announced in proforma invoice are valid and how long the buyer can enjoy those benefits. Moreover, the time of validity of proforma invoice is also important for opening the letter of credit.

The Name of the Product

The name of the product should be mentioned in proforma invoice and invoice precisely. By the name of the product we mean the specifications of the product such as the material. In some cases, the tariff numbers of the goods are also included in proforma invoice. This is very important because of the classification and evaluation of goods in customs warehouses.

 The Quantity of the Products

The quantity of the purchased products based on the agreed terms between the buyer and the seller should be mentioned in proforma invoice, because the agreed terms are specific to that amount. The quantity of the products depends on the type of them and are determined by their unit of count, such as weight, volume, or number of other units.

The Price of the Products in Proforma Invoice

Price is one of the most important points in Profroma because the parties will agree on the terms of the transaction after agreeing on the price. Usually price is expressed for per unit and for whole quantity. If you have purchased different items, the price of the goods in proforma invoice will be announced for per unit and the general prices in a column below. Finally, the price of each item is multiplied by the price of the number of goods and is calculated, and finally the total price of the goods is written in proforma.

Regarding the freight for transportation of goods, it can be said that this case is also paid to the transport company based on the agreements made between the buyer and seller. The price of the goods may be calculated at the cost of shipping, in which case the seller is obliged to pay this cost to the shipping company.