What is a Proforma Invoice? How is a Proforma Invoice Created?

A proforma invoice, which is of great importance for all companies serving in the commercial field, is a type of invoice that needs to be issued for the future. You can find the answers to many questions, such as what type of invoice I should issue, what a proforma invoice is, and how to prepare it, which create big question marks in the minds of entrepreneurs and business operators who have just started their services, by reading the rest of the article.

What is a Proforma Invoice?

It can be said that a proforma invoice, which does not carry any obligations, is a proposal invoice. This document, which specifies the services offered or goods sold by one party to another, can also be called a preliminary invoice.

This type of document, which is frequently used in foreign trade, does not have any regulation under Commercial and Tax Law. For this reason, each company can issue a proforma invoice suitable for its own needs. However, it is worth noting that this type of document also serves as an international sales contract.

What Information Should a Proforma Invoice Contain?

In the process of preparing a proforma invoice, certain information must be processed into the document. However, prior to this information, you need to add the phrase "Proforma Invoice" on top of the invoice. After adding the phrase "Proforma Invoice", you can create your invoice by including the following information:

• Type of goods and services

• Invoice date

• Personal information of the buyer and seller: name, surname/title, addresses

• Origin of the goods

• Size, weight, quantity of the goods

• Unit price, quantity, amount of the goods or services

• Type of delivery

• Type of shipment

• Detailed description of the goods or service (packaging features, number, etc.)

• Freight and insurance premium amount

• Signature of the person issuing it

What are the Points to Consider When Issuing a Proforma Invoice?

In document preparation and management processes, it is a crucial point you must pay attention to, to absolutely specify the type of document you are preparing. It should also be noted that the proforma invoice, which has simpler features compared to standard invoices, should be prepared on letterhead. The important rules you should pay attention to while preparing a proforma invoice can be listed as follows:

• The invoice number and date, which should be present on almost every invoice, must be located in the upper right corner of the document.

• In the upper left corner, seller information such as name, surname, title, and address should be written, followed immediately below by buyer information in the same manner.

• All details regarding the service, product, and these services or products must be specified in the middle section of the invoice. Among these details, descriptions of the services or products, quantity/duration, unit prices, and VAT rates should also be included.

How to Prepare a Proforma Invoice?

As with every invoice, specific data is needed in a proforma invoice as well. In the proforma invoice, which has a very simple form compared to other invoices, the data to be processed is also at an entry-level. You can choose different programs when creating the page where the data will be processed. However, the most commonly used programs for this process are Excel and Word. Excel's spreadsheet feature provides great convenience in proforma invoice preparation processes.

In the preparation process of the document, of the product or service intended to be sold, the dynamic details such as;

• Price

• List of requested needs

• Dimensions

• Currency in which the sale will be realized

• Insurance costs

• Terms of payment

• Type of shipment

• Validity period of the offer must be specified.

Why is a Proforma Invoice Used and Who Can Use It?

The proforma invoice, used in import and export operations in foreign trade, is issued before the delivery of a service or goods. In this issued document, the buyer can review all details regarding the service or goods. The areas where the proforma invoice, which can be prepared and issued by all businesses serving in the commercial field, is most frequently used and its reasons for use can be listed as follows:

• The proforma invoice, which significantly accelerates commercial processes in the foreign trade sector, allows finalizing sales details and managing the sales process effectively.

• In the e-commerce sector, the proforma invoice, which documents buyer and seller information and includes payment and delivery details, can also be issued to inform consumers.

• The production and logistics sector is an area with complex processes and a very high error rate. A proforma invoice also has the character of a document that prevents various confusions and minimizes the rate of making mistakes.

Proforma Invoice Examples: In Which Situations Is It Used?

The sample proforma invoice, which has the character of a preliminary invoice or proposal invoice, is a frequently needed document. This document, prepared for the purpose of submitting an offer or managing the purchase process in commercial situations where a purchase is planned, can also be requested to receive a down payment.

Additionally, we have prepared a detailed proforma invoice sample for you as a Google doc. You can access it online from this link.

Proforma Invoice and Export Transactions: How to Use Proforma Invoice When Exporting?

The proforma invoice is an important document used in export transactions. It contains the details of the commercial agreement made between the exporter and the buyer and is necessary for the buyer to make their payment. The use of a proforma invoice regulates the export process and meets the expectations of both parties. The process steps regarding the use of proforma invoices when exporting are as follows:

Determination of Product and Agreement Details

The exporter and buyer must determine the details and conditions of the commercial agreement. Agreement details should include information such as the description, quantity, price of the products, payment terms, delivery method, packaging, and insurance information.

Proforma Invoice Preparation

The exporter prepares the proforma invoice containing all agreement details and sends it to the buyer. To remind you once again of the information that should be included on the proforma invoice, it can be listed as follows:

• Exporter and buyer information (name, address, telephone, etc.)

• Invoice date and number

• Description, quantity, and price of products

• Delivery terms (indicated by Incoterms)

• Terms of payment

• Packaging and insurance information

• Total invoice amount

Buyer's Approval

The buyer should review the proforma invoice and approve it if they accept the terms of the agreement. This approval can be done in writing or electronically, or by making an advance payment.

Advance Payment and/or Opening of Letter of Credit

After the proforma invoice is approved, the buyer can make an advance payment or have a letter of credit opened according to the payment terms. The exporter continues the transaction by checking this payment or letter of credit information.

Initiation of Export Transactions

The exporter begins export transactions after receiving the buyer's payment or confirming that the letter of credit has been opened. This process covers the production, packaging, shipment, and customs clearance of the products.

Issuing Commercial Invoice and Other Export Documents

When export transactions are completed, the exporter issues the commercial invoice and other export documents. These documents must comply with the agreement terms specified in the proforma invoice.

Navlungo is Always with You in Your Export Process

Navlungo is a digital logistics platform that simplifies and speeds up your export process. Navlungo allows you to receive quotes from logistics companies, evaluate the most suitable price and service options, track shipments, and manage complex processes such as customs clearance.

Navlungo also stands by your side as a reliable solution partner in your export operations by offering transparent pricing and comprehensive customer support. You can contact Navlungo immediately to carry out your export transactions in a more efficient and hassle-free manner.