How to Make a Proforma Invoice Step by Step

A proforma invoice functions as a preliminary bill of sale, issued by a seller to a buyer before the actual sale or delivery of goods or services. Its primary purpose is to outline the terms of a proposed transaction, providing an estimate of costs and quantities. This document serves as a commitment from the seller to deliver specific items at a stated price, allowing the buyer to review and formally agree to the terms. It is not a demand for payment and does not create a legally binding debt until a commercial invoice is issued later.

Required Information for Your Proforma Invoice

Creating a proforma invoice requires gathering specific details from both the seller and the buyer. This includes their complete legal names, addresses, and contact information to ensure clear communication.

The document itself needs a clear heading, prominently labeled “Proforma Invoice,” along with a unique invoice number for tracking. The date of issue is also important, establishing when the proposed terms were presented.

The core of the invoice must detail the goods or services offered, specifying the quantity, unit price for each item, and the total price per line item. It must also clearly state the total estimated amount due for the transaction, along with the expected currency (e.g., United States Dollars (USD)). Any applicable estimated taxes and shipping costs should be included for a more accurate cost projection.

Finally, the proforma invoice should outline proposed payment terms, such as “Net 30” or “payment in advance,” to set expectations. Proposed delivery terms, often referencing Incoterms like “FOB” or “EXW,” define responsibilities for shipping costs and risks. A validity period, typically 30 to 90 days, indicates how long the quoted prices and terms remain active.

Layout and Standard Elements

The visual arrangement of a proforma invoice helps ensure clarity and professionalism. The seller’s information, including their legal name, address, and contact details, is typically placed at the top of the document, with the buyer’s corresponding information positioned below or adjacent.

The title “Proforma Invoice” should be prominently displayed, distinguishing it from a commercial invoice. A unique invoice number and the date of issue are typically placed in a highly visible location, such as the top right or left.

The core of the invoice usually features a table format for itemizing goods or services. This table should include clear columns for quantity, description, unit price, and total price per item. Following this, a clear summation of financial figures should detail the subtotal, estimated taxes or duties, and shipping costs, leading to the total estimated amount due.

Dedicated sections should outline the proposed payment and delivery terms, ensuring these conditions are easily identifiable. The document should also include a space for signatures or a statement indicating client acceptance, formalizing agreement to the preliminary terms.

Steps to Generate and Send Your Proforma Invoice

Generating a proforma invoice involves selecting a suitable method to compile the necessary information. Businesses commonly use accounting software platforms, which often include built-in templates for various invoice types. Alternatively, readily available online templates, spreadsheet programs, or word processors can be utilized to structure the document.

Once a method is chosen, the pre-gathered information, including seller and buyer details, item descriptions, and estimated costs, is accurately inputted into the selected format. A thorough review for accuracy and completeness is important to prevent errors or omissions that could cause delays or misunderstandings. This review should cover all financial figures, terms, and contact information.

Before sending, it is important to convert the proforma invoice into a non-editable format, such as a Portable Document Format (PDF). This ensures the document’s integrity and prevents unauthorized changes by the recipient. The proforma invoice can then be sent to the client, typically as an email attachment for efficiency, or via physical mail if a hard copy is preferred or required.

After sending, the seller should anticipate a response from the client, which may include formal acceptance of the proposed terms. There is also the potential for negotiation if the buyer wishes to modify quantities, prices, or other conditions. This stage allows for adjustments before a final commercial invoice is issued and the transaction is finalized.

When to Utilize a Proforma Invoice

A proforma invoice serves various practical purposes, particularly in international trade and for securing financial commitments. It is commonly utilized for customs declarations when shipping goods across international borders, especially for items that require formal entry procedures or are subject to specific import regulations. For instance, U.S. Customs and Border Protection often requires detailed documentation for commercial shipments, and a proforma invoice can provide the necessary valuation information.

This document can also be instrumental in assisting buyers with obtaining import licenses or permits from their respective government agencies before goods are shipped. It provides the authorities with a clear overview of the transaction, supporting the application process. Sellers often issue proforma invoices when seeking pre-payment from a client, offering a detailed breakdown of costs before any funds are transferred.

Providing a formal quote or estimate before a sale is finalized is another common application for a proforma invoice. It establishes a clear understanding of the proposed terms, quantities, and prices for the buyer. It can be used by buyers for internal budgeting or approval processes, allowing them to secure necessary authorizations based on a detailed financial projection of the upcoming purchase.