Proforma invoice is used as an invitation to the buyer to place a firm order based on prices quoted in it. Many a time local regulations make it obligatory for the buyer to have proforma invoice which forms the basis for obtaining an import license and/or an exchange permit.
The proforma invoice would normally show the terms of trade and prices. The buyer is encouraged to fill in the quantity and total amount which is treated as an ‘offer to buy’ or ‘tender’. This, when accepted by the seller, forms a firm sale contract. In other words, proforma invoice is the simplest form of a sale contract.
Accepted proforma invoice is conclusive evidence of the terms agreed upon. Details from this are transposed verbatim to the commercial invoice in due course when goods are ready for delivery. Often the seller is required to certify on the commercial invoice that goods are in accordance with the proforma invoice no….dated….
Proforma invoices are also used in the following situations where settlement is not directly linked to the movement of goods e.g:
1. Advance payment i.e. before shipment of goods
2. Consignment sales; goods are exported to an agent who concludes firm sale contracts with the buyers and renders account of these sales to exporter from time to time. Proforma invoice acts as a guide for prices to be obtained from the buyers
3. Tender sales; proforma invoice is used to support a tender for a sale contract.