The answer to this question is really quite simple. A Proforma Invoice is sent to potential buyer of goods to avoid any confusion relating to real costs of goods.
In other words, this preliminary invoice will, like a quotation detail the selling price. Any sales tax which will be add to the purchase price. In addition though, this invoice will also detail transport costs and delivery dates which could be honored. It should the customer agree to the transaction. This preliminary invoice does not mean that the customer is obligate to purchase the goods invoice. The understanding between the buyer and seller is that, on agreement of the contents and fine print of intended sale. The transaction will be complete at a future time. Obviously there must be time limitations as well as fluctuating currency trends cost into the equation to protect both parties.
Understand it properly?
A proforma invoice, like a quotation, will contain an expiry date on the offer to sell made. Although customs authorities not always require this document it is helpful for importer to furnish customs with all necessary details. This pre-advice simply outlines what information will be included in sales invoice once buyer and seller have agreed upon transaction. This document which is issue before such an agreement is obviously open to negotiation. These proforma documents are mostly used where there is an international rather than domestic sales agreement. Therefore seller must ensure that currency exchange rates are clearly outline to avoid any confusion on part of potential buyer. Properly processed, this preliminary invoice could well enable seller to obtain finance from his own financial institution to produce goods. As with any transaction, acceptance of offer should be in writing before seller proceeds with the delivery of goods offered.
Different invoices in business:
An invoice is payment related document in which a seller provides deal information made between him and the buyer. Bill can also be call as financial statement and hence bears high value in the business transaction of any organization. There is the statement of payment make and payment due along with the due date for payments that are due. There are even options of prepayment and discounts offer on that basic. The bill can even bear the product details made in advance and the delivery date. Thus, it is a financial statement in business for both the buyer and the seller. There are various types of bills or Invoices used in business transaction. They are like invoice Proforma, credit memo, commercial invoice, Debit memo, and many more. Invoice proforma is find to be use more and more in foreign trades. This is commitment statement from the seller to be buyer.
Through this they come into a settlement of the date of delivery and others. The payment details are also save in this kind of statement. The credit memo is give when some goods are return by the buyer. They are payment refund commitment. This is more of refund of the money already pay.