What is Proforma Invoice?
A proforma invoice is a document that a seller issues to the buyer before the actual invoice. It contains the details of the items purchased but yet to be delivered. A proforma invoice is more legal than a quotation but less legal than an invoice. Proforma invoices are necessary when a buyer and a seller are doing business with each other for the first time. It acts as a binding contract between the two parties.
Proforma Invoice Format
A proforma invoice is not considered to be a legal document. Hence, it does not need to follow a certain format. Taxes are usually not added to a proforma invoice, and it is not added to the accounting ledger either. However, a proforma invoice contains the GST number of the business. It also has to display the Harmonized System Nomenclature (HSN) code of the product along with other values like CGST and SGST.
There are certain details a proforma invoice format needs to contain:
- The name of the document (Proforma Invoice)
- The name and logo of the seller
- Invoice number
- Date of issue
- Seller’s address
- Buyer’s name and address
- List of the products or services to be purchased along with quantities, rates, and total
- Validity (usually 30-60 days from the date of issue)
- Agreed terms of payment and delivery
- Other certifications by relevant authorities
- Signature of the seller
Where is Proforma Invoice Format Used?
As there is no standard format for a proforma invoice, it can look like a regular invoice. In some cases, proforma invoices are handwritten too. It is used as an unofficial agreement between two parties before a transaction is done.
You can use various ways to create a proforma invoice format:
Handwritten
As a proforma invoice is not a legal document, you can create a handwritten proforma invoice by entering the relevant details. This is easy to make, and you can add or remove products from the list as required. However, handwritten proforma invoices look unprofessional. There is also a chance of errors happening due to incorrect entries.
Microsoft Word or Excel
Most business owners have Microsoft Word or Excel. You can easily create and mail proforma invoices using these apps. You can also use Google Sheets or Google Docs to create proforma invoices. As in handwritten proforma invoices, these have the scope of human error.
Invoicing apps
Invoicing apps such as myBillBook and Zoho Invoice have proforma invoice formats that you can use to create your proforma invoices according to your preferences. You can create personalised and professional proforma invoice formats using these invoicing apps. Proforma invoices act as unofficial invoices between two parties when they deal for the first time. As the proforma invoice is not a legal document, you can add and remove items as per requirements and proceed with the transaction.
