Proforma invoice is one of the terms that exist and are commonly used in the business world. Maybe, some people who work in this field will be very familiar with the term invoice.
However, have you ever heard of a term called a proforma invoice before? In general, both ordinary and proforma invoices are things that have important uses or functions in the course of a business. This is because both of these are invoices related to expenses and income.
In addition, both ordinary invoices and proforma invoices are two different things, even in their use. If you are interested in understanding more deeply about what a proforma invoice is, then you should refer to the explanation that we will provide below.
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Know What is a Proforma Invoice
In general, a proforma invoice is a type of invoice or billing document that has a temporary nature. This proforma invoice will later be given to a customer who has made a purchase to the seller, but this one invoice will be given before the goods purchased by the customer are delivered in its entirety.
Therefore, if it is simply concluded, a proforma invoice is an invoice or billing document that will be used temporarily because the goods received by a buyer will be sent in stages or separately.
In addition, the purpose of this one invoice or billing document is to ensure that the seller and buyer are in the same position regarding the terms of the agreement, be it for the price of goods or services.
This will make a prospective client or buyer have a general picture of the price of the goods or products and the services provided.
For the use of proforma sales invoices, basically it will be used in an activity or business activity. These business activities will later implement a system with payment in advance or it could be in installments.
In contrast to purchase invoices , proforma invoices or billing documents can generally be done using an installment system. However, the nominal installment or installment system follows from the seller’s agreement with the customer.
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Difference Between Proforma Invoice and Ordinary Invoice
Maybe for some people who don’t know what an invoice is, they will be quite confused and feel that an invoice and an invoice are the same thing, when in fact both an invoice and an invoice are two different things.
If the invoice will contain all information on the billing document regarding goods or services that must be paid by the buyer to the seller as well as the maturity date when the invoice must be paid immediately by the buyer to the seller.
In addition, the buyer’s invoice is an invoice or billing document that has an official nature and usually this invoice or billing document will be sent or issued by a seller when the purchase has been completed.
For example, a customer buys 500 chairs and all the chairs have been delivered to the customer who ordered them.
Meanwhile, the difference from this invoice is a summary invoice that will be sent to a buyer or customer before the delivery of goods or the provision of services is carried out.
This invoice is an invoice or billing document which contains information about the type and amount of goods or services purchased by a customer to the seller.
Not only that, this proforma invoice will also contain other important information such as the value of the goods or services, besides that the buyer can also find other information such as weight and shipping costs that need to be borne by the buyer.
The difference between a proforma invoice and a purchase invoice also lies in the nature of the document, if the invoice is an official billing document, then this proforma invoice is just a billing document that has a temporary nature with a quote.
However, the most striking difference between a proforma invoice and an ordinary invoice can be seen from how the two financial transactions are recorded.
If the financial transaction record on the performance invoice is still in draft form so that it still requires confirmation from the buyer concerned so that it can be processed into an invoice, the purchase invoice itself is proof of a purchase transaction that no longer needs confirmation from the buyer.
The buyer’s invoice will only be sent directly to the seller to the customer and is just waiting for the payment process to be made by the related customer later.
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List of Uses of Proforma Invoice
There are actually a lot of uses for this proforma invoice. The following is a list of uses or receipts of proforma invoices in the course of business that you should know, including:
- The use of invoices or proforma billing documents can be used as a document that states the value of goods. Of course, knowing the value of this item is very important because having this value can facilitate customs clearance and will make the goods delivery process run smoothly.
- Invoices or proforma invoice billing documents can also be used as evidence when an item does not have all the required details.
- Not a few use invoices or billing documents for this one to make purchases and these purchases can be approved by parties from within their company.
- For the use of proforma invoices, it is usually used more in the process of import and trade transactions.
7 Important Functions of Proforma Invoice
The following are several important functions that customers need to know who want to use temporary invoices or billing documents, including:
- The use of this proforma invoice can be used as an estimate or estimate of the price that a buyer needs to pay to pay off the invoice given to them.
- This proforma invoice will later record all estimates of the products that will be purchased by the relevant customer.
- The buyer is allowed to make repairs to goods or services as well as the value of what has been purchased if the customer feels that what is recorded on this proforma invoice does not match the order placed by the buyer.
- Can be used as a valid reference when sellers want to enter transactions into their company’s financial books.
- A valid reference can be used if later there is an item or service that has been recorded and then sold to a customer who buys the item.
- Can be used as a legal reference as a tax invoice in certain cases.
- Can be used as a reference if an error has occurred in the process of transaction activities, for example, such as an error in calculating the number of goods sent by the seller to the relevant buyer.
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When Should This Proforma Invoice Be Used
Maybe some companies are still quite confused about when is the right time for them to use or implement the use of this proforma invoice. Then, when is the right time and at what kind of transaction should a company issue an invoice or proforma billing document?
In general, in some transaction activities by making prepayments, a salesperson should need to issue an invoice or a proforma billing document in which the existence of the document can ensure that the purchase financing that has been made will be guaranteed by an invoice before the seller starts to complete the order. purchased by the relevant purchaser.
In addition, the company can also issue and send a proforma invoice as a form of payment request to the relevant buyer. If this happens, it can be concluded that the sales activity will most likely occur because there are not a few sales processes whose transactions have been canceled or are still under consideration.
Therefore, this proforma invoice or billing document can be seen as a sales proposal that will provide an indication if the transaction is still in progress.
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General Use of Proforma Invoice
The following are some cases or activities in general where proforma invoice invoices or billing documents are used in the business world, including:
1. Application of Proforma Invoice Requires Prepayment Process
Some of the services and products must be paid in advance. This will allow a seller to ensure that the financing of the item will be guaranteed before they will complete the entire total order that has been ordered by the relevant customer.
2. Using a Proforma Invoice to Become a Marker If the Sales Process is Most Likely to Occur
When the seller sends this proforma invoice or billing document, it can be said that the transaction activity carried out is not just an estimate, but has become a request to make a payment. This can be a sign that the sale of goods or products will indeed occur in the future.
When Should Seller Turn Proforma Invoice Into Actual Invoice
Once the sales transaction process is complete, you may need to convert the pro forma into a real invoice. In fact, this process itself can be said to depend on whether the process is necessary to issue invoices or not where the invoice issuance process itself also basically follows or is based on applicable laws.
However, buyers or customers may ask you directly. However, if the activity of converting the proforma invoice into an actual invoice is deemed unnecessary, then you as the seller can immediately make the delivery of the payment receipt.
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How to Make a Good and Correct Proforma Invoice
As we have explained above, the stated purpose of creating an invoice or proforma invoice billing document is a form to show the relevant buyer an estimate of the details of the transaction they have carried out.
Then, how do you make a proforma invoice correctly? Here are the procedures for creating a proforma invoice that you should know, including:
1. Unique Invoice Number
This proforma invoice also requires a unique invoice number. However, unlike numbering on regular invoices, proforma invoices generally do not require a unique, sequential code.
2. Complete Company Identity
Your general company information must of course be included on this proforma invoice. The information starts from the name of the company, company address, and don’t forget the contact from the seller. This is very important because it will show if the proforma invoice is real.
Without company information, it is not impossible that customers will perceive it as a fraud and make them not want to pay bills that are given to them.
3. Complete Customer Identity
Another important thing that you should not miss in making this proforma invoice is the name and address of the customer. Do not let when you make this proforma invoice you forget to give or miss it because this will make the delivery of the invoice unclear.
4. Maturity Time
The issue date and when it is due. This must be paid attention to by customers because knowing when the due date will make them remember and not exceed the specified time period.
5. Product Description
Description of the goods regarding the products purchased by the relevant buyer. The seller also writes down the total price. In this case, the total of the price will be included with the total price of goods per unit. If the item has a discount, then you can also list it.
6. Terms and Conditions
Usually a seller has a certain terms or conditions. However, if the seller doesn’t have it then that won’t be a problem either and you can skip this stage.
7. Date of Delivery of Goods
The estimated date of delivery of the goods to the relevant customer.
8. Terms of Payment
For this one process, the company can enter the company account number if the customer wants to make a payment transaction via the local bank transfer method. However, customers can also make payments using methods such as other non-cash payments .
9. Proforma Invoice Validity Period
Expiry date of the proforma invoice. This is also an important point so that the proforma invoice has a timeframe that must be fulfilled by the buyer.
Thus our explanation of how to understand in depth about this proforma invoice and how the billing process from sales is carried out in stages using a proforma invoice.
In general, the proforma invoice creation process can be done manually by creating it on Google Documents or Ms. word.