A proforma invoice is a sales document that the seller sends to the buyer, especially in international orders. This document will contain the order details and it often also the seller’s bank details, to make the payment. The proforma invoice is different from a commercial invoice, because commercial invoice is issued by the seller, after loading or shipping the goods. After defining the terms of the sales contract, the buyer issues a purchase order or letter of credit. The seller must send a pro forma invoice, where he indicates the details of the sales contract. The letter of credit will be based on the pro forma invoice, sent by the seller. The pro-forma invoice is similar to a document produced by the seller, to undertake to sell the goods to the buyer. After receiving the proforma invoice, the buyer submits a purchase order or opens a letter of credit to the supplier and the seller produces and ships the goods. In this moment the commercial invoice is produced by the seller, i.e. the official document, the content of which is almost the same as the pro-forma invoice as an official document produced by the seller, which specifies the type of goods, quantity and price, the conditions of sale.
The differences between two documents could concern the final sale price. The final price on the commercial invoice, could be different in the pro-forma invoice, because this, as we have already explained, is issued before the actual sale and it could have, during production, small adjustments from initial order. Another difference concerns the quantity of products ordered, the one indicated on the Proforma Invoice may differ from the quantity of goods shipped, indicated on the Commercial Invoice. This can happen for several reasons, but the suppliers often have problems in production or they haven’t correctly planned how many products could be loaded into the containers. Regarding the commercial invoice, into foreign trade, it becomes a customs document used as a declaration, by the company that exports beyond international borders.
Finally, the last difference is between a proforma invoice and a purchase order.
A purchase order is a commercial document, an official confirmation of a sale, while a proforma invoice is a sales quote, it isn’t a confirmation, therefore, the details of a proforma invoice, can still change compared to a purchase order, which is a legally binding agreement.
