What is a Proforma Invoice?

A free proforma invoice is a preliminary document that is sent to a buyer before a sale is confirmed. It serves as a tentative agreement and outlines the details of the proposed transaction, including the selling price, deliverables, and delivery dates.

In Latin, 'pro forma' means 'for the sake of form,' implying that it is only a provisional document that will eventually be followed up with an official invoice. The purpose of a proforma invoice is to provide a summary of the agreement reached between the buyer and seller before the sale is finalized.

The use of proforma invoices is widespread in business transactions, as they offer several benefits. For one, they enable businesses to confirm their understanding of the agreement with the buyer, ensuring that both parties are on the same page. Additionally, proforma invoices can be used to negotiate terms, such as discounts or delivery dates, before the final sale is completed.

To illustrate this concept, let's consider an example. Suppose a company, XYZ Inc., agrees to sell 100 units of its product to a buyer at $10 per unit. The sales team at XYZ Inc. will then prepare a proforma invoice outlining the details of the agreement, including the selling price, quantity, and delivery date. This document is sent to the buyer for review and approval.

Once the buyer has reviewed and agreed upon the terms, the final sale is confirmed, and an official invoice is issued. The proforma invoice serves as a precursor to this official invoice, providing a summary of the agreement that can be referred to in case of any disputes or questions.

In conclusion, a proforma invoice is an essential document in business transactions, providing a clear understanding of the proposed agreement between buyer and seller. By using proforma invoices, businesses can streamline their sales process, reduce misunderstandings, and build trust with their customers.

Free proforma invoice