Proforma Invoice, Features, Format

Proforma Invoice is a preliminary or estimated bill of sale sent by a seller to a buyer before the actual delivery of goods or services. It provides details such as description of goods, quantity, value, terms of sale, payment method, and estimated shipping costs. Unlike a final invoice, it is not a demand for payment but serves as a quote or declaration of intent to deliver goods. It helps the buyer understand the cost and terms in advance and is often used in international trade for customs clearance and approvals. A proforma invoice does not affect accounting records.

Features of Proforma Invoice:

• Preliminary Document

A Proforma Invoice is a preliminary document that acts as a quotation or offer issued by the seller to the buyer before goods or services are delivered. It outlines the expected cost, description of goods, quantity, price, and terms of trade. It is not a legally binding invoice but rather a confirmation of intent to provide goods or services. Buyers can review the information, clarify terms, and prepare for future transactions, making it an essential document in international trade and business planning.

• Non-Binding in Nature

One of the primary features of a Proforma Invoice is that it is non-binding. It does not serve as a final demand for payment and does not get recorded in the books of accounts as a receivable or payable. Since it is not an actual invoice, the buyer is not legally obligated to pay the amount mentioned. Instead, it functions more like a sales quotation or a commercial estimate, allowing both parties to agree on the terms before entering into a binding agreement or transaction.

• Includes Detailed Product Information

A Proforma Invoice provides comprehensive details of the proposed transaction. It typically includes the description of goods, quantity, unit price, total value, applicable taxes or duties, terms of delivery (like Incoterms), and payment terms. This ensures that the buyer has all relevant information before the final invoice is issued or the transaction is executed. In the case of services, it may outline the scope of work, hourly rates, and total expected charges. This helps prevent disputes or misunderstandings between the seller and the buyer.

• Useful for Customs and Import Approval

In international trade, Proforma Invoices are often used by importers to obtain import licenses, arrange for foreign exchange, or seek approvals from customs authorities. Since it contains estimated shipping costs and duties, customs officials use it to assess the value of goods entering the country. Although it is not the final commercial invoice, it serves as a required document to initiate the process of international shipment and compliance with regulatory requirements. It acts as a basis for customs clearance before the goods are dispatched.

• Helps in Budgeting and Planning

For buyers, a Proforma Invoice is a valuable tool for financial planning and budgeting. Since it outlines the projected cost of the goods or services, buyers can estimate their future expenses and arrange necessary funds in advance. Businesses use proforma invoices to generate purchase orders, secure internal approvals, or initiate payment processes before the actual sale takes place. In project-based or service-driven industries, it helps clients understand project costs and allocate resources effectively before committing to the purchase.

Proforma Invoice Format (in Table):

| Buyer: ABC Enterprises |
| Address: 56, Market Street, Mumbai – 400001 |
| GSTIN: 27AABCA1234G1Z2 |

| Name: Mr. Rohit Mehra    Designation: Sales Manager |