What Is A Commercial Invoice
A commercial invoice is a legally binding document that an exporter (seller) delivers to the importer (buyer) upon completion of international trade. These documents are an indispensable part of across-the-border trading and sea-freight shipping.
You can think of this invoice as both a contract between a buyer and seller and a proof of sale. If you’re either of those parties, it’s important that you understand the real implications of commercial invoicing.
Why Should You Use A Commercial Invoice?
Unlike a non-commercial invoice, the purpose of commercial invoices is to enable tax and duty calculations for customs clearance.
This specific invoice is a trading document that mentions the price, quantity, and value of the goods being traded. The invoice must also detail the conditions of trading agreed upon between the exporters and importers before the actual transaction.
At times, the buyers might be required to produce a copy of these invoices to their banks for the release of funds via letters of credit to the seller.
What Information Is Contained In A Commercial Invoice
When drafting a commercial invoice, it’s crucial that you include the required information. If you’re still new to these invoices, you may take help from scores of invoice templates available online. Most of these have a standard set of information. The best invoice template will have the following essentials:
Details of the invoice:
- Invoice number
- Date of invoicing
- Order number
- The complete cost of sale
Details of the trading parties involved:
- Personal information of the exporter/seller (name, address, and contact)
- Seller/exporter’s tax identification number (VAT, and so on)
- Personal information of the importer/buyer (name, address, and contact)
- Buyer/importer’s tax identification number (VAT, and so on)
- Information related to the notify-party
Details of the shipping merchandise:
- The number on the bill of lading
- Agent forwarding merchandise
- HS code
- Descriptions of the merchandise (packaging, weight, and units)
- Incoterm (International Commercial Terms) under which the merchandise is shipped
- Merchandise origin
- Export date, transportation means, and destination
- Signature of the shipper
What Happens If A Commercial Invoice Isn’t Filled In Correctly?
When you dispatch this invoice, you’re bound by law to fill in all necessary details to the best of your knowledge. Failing to supply accurate information can result in extended costs due to shipping delays and hold-ups at the customs office.
This is also important for customs declaration purposes. When you report incorrect information, it can lead to the underpayment of the tax and duties. This can have unforeseeable legal ramifications.
What Is The Difference Between A Commercial Invoice And A Bill Of Lading
Don’t confuse this invoice with a bill of lading. A bill of lading (B/L) is a contractual document that’s passed between traders importing or exporting with sea or air freight. This document contains important information such as the ownership of the goods and the title to them. This information is missing in a commercial invoice.
You must also take care to remove any discrepancies between the information stated in the invoice and that which goes on the packing list. The two documents entail similar information but differ in purpose.
A packing list mostly contains a description of the goods being traded and can contain information relevant to the commercial invoice meaning. However, its function is more logistical. In case of a dispute that may arise between exporter/importer or the customs office, terms of the packing list will be invoked.
While the packing list is sent to the receiver/consignee, the invoice is delivered to the person making the payment. In most cases, they’re the same. Hence, the information on the two must correlate.
The Best Services For Issuing A Commercial Invoice
There are numerous free templates available that businesses can download for issuing invoices. The most popular among these is the Microsoft template. You can access these templates and even add your logo to the document. The excel file allows you to enter the quantifying formulas to calculate the total costs of the goods that are being shipped.
It’d be better to streamline the entire process by using a reliable invoicing software solution. Here are a few you can use to generate these invoices faster.
- QuickBooks: This software is prepared to do all that’s needed in generating a sound invoice. In addition, it can deliver these invoices electronically to the client. Once the invoice is ready, you can simply print the copy and dispatch it with the goods being shipped
- Xero: This is another digital solution that can help you streamline commercial invoicing for expedited business. Xero, like QuickBooks, can create multiple invoices that can be printed and sent with the shipments. The software can also arrange reminders for overdue invoices and ring alerts when a payment has been made
Combining custom invoices with invoicing software can greatly reduce the workload that’s otherwise associated with generating invoices manually.
Commercial invoices are legally binding documents between exporters and importers. Both parties will need to understand the functions of these invoices. Additionally, they’ll need to know how they’re different from other contractual documents in international trade. Most importantly, senders must spell out all necessary information in concise and lucid terms within these invoices to avoid problems later.