Teamleader Blog Article

Proforma invoices: when, why and how to use them

Cedric Auman Cedric Auman on 23-Apr-2019 16:12:59 in Sales & Marketing

Proforma invoices: when, why and how to use them

Proforma invoices are often used to provide customers with more information about their purchase. Find out what proforma invoices include, what makes them different from quotations and regular invoices and how to create a proforma invoice yourself. 

What is a proforma invoice?

A proforma invoice provides both buyers and sellers with the baseline of a sale, breaking down the items or services. It’s often used to send customers a detailed overview of their purchase, before creating an actual invoice.

Pro forma invoices onlineWhat is the difference with regular invoices?

A proforma invoice looks very similar to a regular invoice, with two important differences.

  • It clearly states it’s a proforma invoice
  • There’s no invoice number

Customers aren’t obligated to pay for products or services a proforma invoice lists. It can be useful to specify a sale proposal, give the customer the chance to request changes and convert the proforma invoice to a regular invoice by changing the title and adding an invoice number. The completed invoice can then be easily reissued. A proforma invoice has no fiscal value, so it’s not included in your accounting record.

What is the difference with quotations?

A proforma invoice lists the requested services or products and their prices. A quote often outlines the same things and the biggest difference is visible in the layout: the format of a quote is more like a letter, while a proforma invoices looks like an invoice.

Both types of documents are used to share information with customers before you know all details of a sale and before you finalised terms, conditions and prices. Potential clients can then decide to go through with the transaction or negotiate the scope of work or pricing.

Creating a proforma invoice

Before creating a proforma invoice, it’s important to take the following in mind:

  • What are the costs of the goods or services you’re selling?
  • What are your export costs? Calculate them using a cost sheet, including shipping or other forms of transportation, warehousing, insurancing, taxes, custom fees and duties.

Once you have a clear idea of costs and prices, you’re ready to create a proforma invoice. Let’s discuss the elements your invoice should include.

Invoice header

Always mention “Proforma Invoice” in the header.

Include your business logo, business name and contact information, making your invoice easy recognisable. Use full names and mailing addresses for your own contact details, as well as the buyer’s.

Indicate the date the invoice was requested and created. If the agreement is only valid through a certain date, it’s helpful to include the expiring data by using a phrase like: “Terms valid through 31 January 2018”.

Proforma invoices shipment informationReason for export and shipment information

If you need to export your goods, explain why this is necessary. Mention if the items are for sale, sample, repair, return or gift. If they need to be exported back, like in the case of repairs, note that the export is temporary, which you can easily indicate by adding “temporarily exported”.

Also add the mode of transportation (air, train, car, … ), the total number of packages you’re sending and the total gross weight of the shipment.

Itemized breakdown of charges

Include the following information on your proforma invoice:

  • A line item for each good or service you provide
  • Detailed descriptions, such as size, colour, model number or other specifics relevant to the sale. Also include the country of origin or where your products are manufactured.
  • Number of units included
  • Price per unit or each individual item
  • Total cost

Try to be as specific as possible. Most proforma invoices get rejected because the information isn’t important to buyers or doesn’t mention what they need to know.

Tax, shipping, and total due

If you’re active in an international market, it’s important to check the tax laws and add the proper sales tax to your invoice. Also add necessary shipping and handling charges.
Make clear which currency you use, as well as terms of payment. You don’t want to miss out on money by miscalculating shippings, taxes or custom fees, or by simply forgetting to add them.

Proforma invoices international tradeInvoices for international trade

When creating a proforma invoice for international trade, you should include the buyer’s reference number, date of inquiry, the price of each item, delivery points, insurance, shipping, custom costs and the estimated shipping date.

Footer

Include additional information, such as your warranty or return policy. This is also the perfect moment to thank customers for doing business with you.

Finish up your proforma invoice by signing and dating it. This should include your full name and title, assuring the recipient you’re authorised to make a sales offer.

Proforma invoices in Teamleader

Did you know you can also choose an automated solution for your proforma invoices? Using our invoicing software, you can:

  • Create proforma invoices and convert them into regular invoices afterwards - it just takes a few clicks
  • Have an overview of all your customer information, quotations and (un)paid invoices, which simplifies collaborating and communicating with the rest of your company
  • Generate invoices automatically and use templates for proforma invoices (without date or invoice number)
  • Change and delete proforma invoice easily, for instance to add different dates
  • Send recurring (proforma) invoices automatically with subscriptions

Why not go for the easiest solution? Learn more about invoicing with Teamleader.