If you’re dealing with international sales or shipments, you’ve probably come across both pro forma and commercial invoices. They might look similar, but they play very different roles. One is more like a quote, while the other is an official record of a sale. Knowing the difference can save you from confusion, and help keep your shipments and payments on track.
A pro forma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. It outlines the items being sold, along with their prices, quantities, and other important details such as shipping costs, delivery timelines, and payment terms.
Although it closely resembles a standard invoice, a pro forma invoice is not an official demand for payment; instead, it serves as a quote or estimate provided to the buyer to help them make an informed purchasing decision or to begin the process of securing import permits, arranging financing, or planning logistics.
Pro forma invoices are commonly used in international trade, where they help both the seller and the buyer clarify expectations and avoid misunderstandings before a formal sale takes place. This document can also be useful for customs declarations, as it provides essential information about the goods being shipped.
While it doesn’t have accounting value and is not recorded as a receivable or payable, it plays a critical role in facilitating smoother business transactions, especially when dealing with new clients or cross-border orders.
A commercial invoice is an essential document used in international trade that serves as a record of a transaction between a seller and a buyer. It outlines important details such as the names and addresses of both parties, a description of the goods being sold, the quantity, unit value, total value, currency, and payment terms.
Unlike a simple sales receipt, a commercial invoice is used for customs purposes, enabling authorities to determine the value of the goods for duties and taxes. It also includes information such as the country of origin, HS (Harmonized System) codes, and shipping details like the mode of transport and delivery terms based on Incoterms.
This document is typically prepared by the exporter and accompanies the shipment to ensure smooth processing through customs in the importing country. It acts as a legal agreement and proof of sale, making it a vital part of the documentation needed in cross-border trade to facilitate clearance, avoid delays, and comply with international shipping regulations.
Here’s a quick comparison of the key differences between a pro forma invoice and a commercial invoice:
A pro forma invoice should be used when you need to provide a buyer with an estimated cost or quote before the actual sale takes place. It’s helpful in situations like:
use a pro forma invoice to set clear expectations before committing to a transaction.
A commercial invoice is used after a sale is finalized and the goods are ready to be shipped. It serves as a legal record of the transaction and is essential for:
Use a commercial invoice when the transaction is complete and you’re ready to ship and receive payment.
An invoice requests payment for specific goods or services; a statement lists all account activity, showing balances, invoices, and payments over time.
Discover the hidden automation in your payment, billing and invoicing workflows. Talk to our experts for a free assement!
