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What is a ProForma Invoice

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Marcus Carlson Pro Forma Invoice
 What is a ProForma Invoice

One of the most important functions of any business is getting paid.  After all, why be in business if not for the money?  When determining how and when to send bills to customers, multiple options might arise, begging the question of what is a pro forma invoice and what benefits does it offer? 

Simply put, a pro forma invoice is like a regular invoice, with one important difference: it’s an invoice for goods that haven’t been received yet. You can basically think of a pro forma invoice as a hybrid between a quotation and a regular invoice.

Pro Forma Invoice Explained

If you’re not familiar with pro forma invoices, you may be wondering: what does pro forma invoice mean?  If you’re engaged in international trade, it may lead to the next question, what is a pro forma invoice for customs?  Here’s what you need to know.

This type of invoice acts as a preliminary bill of sale and contains the full details of the products included in a shipment. It gives the customer an accurate idea of what they’ll receive - and at what cost - if they decide to proceed with the order.

For this reason, it’s important to include all costs associated with each product on your pro forma invoice including shipping, handling, and customs duties.
Should your customers decide that they are happy with the quantity and type of goods on the pro forma invoice, there’s no need to create a new invoice for their order. The pro forma invoice will serve as a legally binding payment agreement between you.

Finally, if you’re shipping goods abroad, a pro forma invoice is usually required by customs authorities.

Pro Forma Invoice Example

Let’s look at an example of how you could use a pro forma invoice in your business.
You have a client in a foreign country who would like to order 1000 products from you to be shipped to their premises.

You could either send them a quotation, wait for them to negotiate the price, shipping fees, and terms and conditions, and then send them an invoice later - or simply send a single pro forma invoice. Since the pro forma invoice does the job of a quotation and invoice, it makes perfect sense to send one document instead of two using online invoicing software.

Pro Forma Invoice With Online Invoicing Software

Pro forma invoicing is used frequently in business, and if you have to process a large number of sales per day, finding time to produce invoices manually can be a challenge.

Fortunately, by moving from paper invoice to e-invoicing you’ll be able to eliminate hours of administrative tasks each week, freeing up your resources and that of your team for more productive tasks.

Online invoicing software will also allow you to generate detailed, eye-catching invoices that prominently feature your company logo, helping with branding objectives.

The Benefits of Producing Pro Forma Invoices Using Online Invoicing Software

We’ve already covered the time-saving, efficient and professional aspects of using online invoicing software for small business. Here are some more benefits that you’ll enjoy when you move your pro forma invoice generation online.

  • You can invoice either daily, weekly, or monthly and pay almost the same fee
  • You’ll be able to track invoice payments and avoid bad debts
  • By setting automatic reminders for your clients’ invoices, you can reduce time spent following up on payments yourself
  • You can integrate your online invoicing with your cloud accounting system to automatically report weekly and monthly revenue for your business

Bottom Line - Our Tip

Pro forma invoices are a great way to streamline your sales and payment process. Using online invoicing software will add even more efficiency to your business processes.

With flexibility, cost-effectiveness and the capacity to scale up, online invoicing software is the ideal tool for any growing business.