Proforma Invoices: Description and Utilities

Proforma Invoices

What is a proforma invoice?

A proforma invoice is a document used to express a business Excel quotation format as a budget in writing (you can download a budget template here) It is a very common document in international trade, and its name is “Proforma Invoice” in English, and it is usually issued by the goods The exporter expresses the terms of sale to the importer. In our territory, it is also usually issued by companies according to certain requirements of customers. You can make everything easier with a proforma invoice model in excel or word.

What information is typically reflected in a proforma invoice?

Typically, a proforma invoice (What is an invoice? 7 essential elements to include) contains:

  • Information about the issuing company: business name, CIF, address, etc.
  • The data of the client that requested it.
  • Date of issue
  • Number (different from ordinary invoices)
  • A description of the product and/or service included.
  • The number of units per item.
  • Prices apply.
  • apply for tax
  • Conditions of sale: payment terms, form, conditions and place of delivery, Incoterms applicable in case of import and export, etc.
  • Validity period of the condition
  • The most important thing is that the word “form” appears on it.

What is the difference between a regular invoice and a proforma invoice?

Although the appearance of the two documents is very similar, the functions of the two documents are different since the aforementioned “form” must be explicitly present in the latter.

A plain invoice is a document of proof of a commercial transaction and has all the corresponding legal effects: as an accounting document, as a tax certificate, as proof of the existence of a transaction in the event of a commercial dispute between the parties, etc.

Proforma invoices, on the other hand, are used to justify a commercial offer and its conditions before a transaction takes place. It is also binding in terms of the conditions of sale and the price reflected in it, so the issuer must be careful not to make mistakes in preparation or to issue rashly, as the buyer may force it to comply with these conditions within its validity period. In international trade, pro forma invoices are sometimes used as contracts between exporters and importers.

Why we use  a proforma invoice?

It is often used as a domestic and international budget. A proforma invoice is a very common way of documenting the validity of a commercial offer before a third party, and also to secure certain conditions.

Examples of the use of proforma invoices

Here are some examples of the most common situations where proforma invoices are used:

  • From the issuer’s point of view, proforma invoices can be used for commercial tracking of those interested in their products and services.
  • Entrepreneurs who are preparing a feasibility plan can request proforma invoices from commodity suppliers as part of their investment plans. In this way, you can demonstrate that the above-mentioned feasibility plan is based on real data from the market, not data from its invention.
  • If an unemployed person applies for a one-time payment of unemployment benefits for investment, he needs to explain to the management department where the funds are going, and ask him to first show the corresponding proforma invoice when applying for a one-time payment, and then it will need to prove that you have indeed made the investment. invoice.
  • A consumer who asks for a loan to buy a vehicle, his bank will usually ask for a proforma invoice justifying the price of the vehicle so that it can be compared to the amount he wants to finance and that the amount is reasonable.
  • Companies that provide proforma invoices when applying for subsidies to the public administration.
  • Importers of goods can request a proforma invoice from the foreign supplier that will send the goods and submit it to their financial institution to apply for short-term financing. Once the entity has approved the working capital facility, it will proceed with the remaining documents and procedures required to execute the transaction.
  • The importer submits it to the appropriate agency for certain customs licenses.
  • In cases where an advance payment is required to initiate a manufacturing order, as proof of prior commercial agreement.
  • In short, this is a document that is useful in many situations in the business world.

What is the quotation format?

A quotation format is a document produced under the Word or proforma invoice template in excel program which the value of a product and/or service is established and demonstrated. In this sense, a quotation format can be defined as a document that supports the development of a business transaction.

What are the advantages of the quotation format?

There is a quote format when the price is known, as is said for a product or service. Having an offer, i.e. knowing its personal or wholesale value, helps to have a conversation with an institution or company. By understanding value, price, and cost, interested parties can ask the company directly, and even request discounts on purchases they plan or consider.

In what situations is the quote format used?

The aforementioned quotation format is a valuable element for any organization as it is used in all stages of the business process. In this case, it may be pointed out that, starting with planned purchases, such as:

  1. Contact the supplier for approximate quantities of products, individually and in total.
  2. When we are the seller, because in this case we inform the buyer about the cost of our products and services. In addition, before completing the negotiation process, we will inform you of the discounts we can offer on the goods or services offered.

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