An Introduction to the Proforma Invoice

Introduction to Proforma Invoice
Image Source: istockphoto.com

 

As an exporter, Before you ship your goods, you need to check that your import export data is properly arranged or not. In those data, a proforma invoice is needed to be furnished, serving as a negotiating medium between you and your export customer and an outline for the entire process.

  

As one of the primary documents arranged in an international transaction, a proforma invoice serves as a quote and appears like a commercial invoice. This form, when accurately filled, contains key information that will be further used on many of the export documents needed to prepare later.

 

 

Below are the six essential components to consider when filling the proforma invoice:

 

1.       Cost

The most important detail on the proforma invoice will be the cost. For apparent reasons, you need to ensure the cost is correct. When determining the cost, bear in mind that you are usually pricing more than the cost of your commodity. Depending on the terms of the sale, you may require considering transportation expenses including duties, insurance, and taxes. Also, unless your cost never changes, make sure to insert a termination date for the invoice.

 

2. Information of Products

Input a clear, comprehensive explanation of the goods with any other related information like the product classification, the origin country, and the dimensions and weight of your products. The exact six-digit harmonized system code will inform your buyers to decide if any taxes and duties they may have to bear while the dimensions and weights allow them to estimate the delivery charges if they are to bear the same.

 

3. Terms of Sale

 

People who are new to export business are frequently confused by the 11 delivery terms globally used in EXIM trade. These 11 terms are called Incoterms 2010; they are different than the conventional shipping terms used in local dealings. They clearly describe the obligations of both buyers and sellers during the entire export process. Incoterms 2010 distinguish with accuracy key times of the export transaction like when the liability is shifted from the seller to the buyer.

 

4. Payment Terms

If you want to get the payment, then you'll have to fill the proforma invoice with relevant information about the payment terms that you’ll be using along with your remittance information. Proforma invoices are very handy for buyers who have to open a letter of credit with their respective bank, arrange for financing, and apply for an import license.

 

5. Delivery Details

Considering that the buyer affirms the sales terms of your proforma invoice i.e. when and where will the goods be shipped, and when and where will they arrive at the agreed location. If left unfilled, all this information can cause a dispute in your export transaction and can have a great impact on the original cost of the order. It could also be the difference between getting the money and losing the money.

 

6. Export Controls

Apparently, the entire requirement of furnishing a proforma invoice is conditional on whether or not you can deal with that particular customer. Indian export regulations classify certain individuals and organizations with whom you can't professionally deal, places restrictions on entire countries, and checks what type of data and commodities can be exported or imported. Make sure you learn about these requirements before progressing with a potential export customer.