Commercial vs Proforma Invoice: What’s the Difference?
In the world of business, invoices are essential for keeping track of payments and ensuring that clients are paying for goods and services that are provided. But there are two types of invoices that are commonly used—commercial invoices and proforma invoices. While similar in their purpose, there are key differences between the two that business owners should be aware of.
A commercial invoice is a document that typically includes the seller’s name and contact information, the buyer’s name and contact information, a description of the goods or services being sold, the invoice date, the quantity and price of each item, and the total amount due. The commercial invoice is typically used when the goods are being shipped, as it serves as a document of evidence of the transaction. It is also used to calculate customs duties and taxes that may be due.
A proforma invoice is an estimate of the cost of goods or services that are being sold. It is used as a way to inform the buyer of the cost before the goods or services are provided. Unlike a commercial invoice, a proforma invoice does not serve as a document of evidence for a transaction. It is also not used to calculate customs duties or taxes.
Both commercial and proforma invoices are important documents in the world of business, but they serve different purposes. Knowing the difference between the two types of invoices can help business owners ensure they are sending the right document to their customers.
Frequently Asked Questions
FAQ 1: What is the difference between a commercial invoice and a proforma invoice?
Answer: A commercial invoice is an official document issued by a supplier to a customer outlining the goods and services provided, the payment terms, and the total cost of the transaction. A proforma invoice is a document used to provide an estimated invoice to a customer for goods and services that have not yet been provided. It does not include payment terms, as it is not an official invoice.
FAQ 2: Are commercial invoices and proforma invoices legally binding?
Answer: A commercial invoice is a legally binding document, as it is an official record of the transaction. A proforma invoice, however, is not legally binding, as it is not an official invoice.
FAQ 3: How do I prepare a commercial invoice?
Answer: A commercial invoice should include details such as the description of the goods or services provided, the payment terms, the total cost, the date of shipment, and the buyer and seller’s contact information.
FAQ 4: What information should be included in a proforma invoice?
Answer: A proforma invoice should include details such as the description of the goods or services to be provided, the estimated cost of the transaction, the date of expected delivery, and the buyer and seller’s contact information.
FAQ 5: When should I issue a commercial invoice and when should I issue a proforma invoice?
Answer: A commercial invoice should be issued when goods and services have been provided and payment is expected. A proforma invoice should be issued when goods and services have not yet been provided but an estimated invoice is requested.