Wednesday, November 07, 2007

What is Proforma Invoice

A “Proforma Invoice” (Proforma) is an official price quote — a “step up” from a published price list that allows the customer to present the Proforma Invoice to their Accounting Department and to arrange a prepayment. It is most commonly requested by customers pre-paying orders via bank money transfer before shipping an order. It is used by customers to formalize the terms of sale (price, shipping, F.O.B. location, shipping date, etc.) and properly allocate and/or transfer the funds needed for the purchase. The Proforma guarantees a price and terms for a 60 days period of time while the customer acquires and/or transfers the funds. ~ source

In foreign trade transactions, a pro forma (or proforma) invoice is a document that states a commitment from the seller to sell goods to the buyer at specified prices and terms. It is used to declare the value of the trade. It is not a true invoice, because it is not used to record accounts receivable for the seller and accounts payable for the buyer. ~ source

My ex-colleague called 2 days ago asking me what is proforma invoice. My explanation is not as detail as the above but basically that is what I told him. A document for the customer to make payment to us. This is normally use when you want to export goods and requesting payment via telegraphic transfer.

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