What Are the Benefits of Using a Pro Forma Invoice? Thus, it is a good tool for cash flow planning, but it cannot be used for accounting purposes. If you are in receipt of a pro forma invoice from another business, it allows you to plan for how much is expected to be due if you accept the agreement. It may be requested by your tax preparer as evidence for revenue during the tax year.Ī pro forma invoice gives your business a general idea of the amount of money that will be received by your company for services or goods delivered. This invoice should be filed for reference, and can also be used to support an audit. It will be recorded in the general ledger as accounts receivable or accounts payable. AccountingĪ commercial invoice is used as the basis for paying a bill or earning revenue. Terms and conditions may be included as a precursor for performance on behalf of the vendor. It should be clearly labeled as a pro forma invoice. The format of a commercial invoice should include the logo of the business, contact information, billing address, information regarding the services provided or goods delivered, amount due, and relevant terms and conditions.Ī pro forma invoice will include the logo of the business, contact information, billing address, an estimate of the services to be provided or the goods to be delivered, and the estimated amount of the bill. It can provide a description of the goods and a good faith estimate of costs. The use of a pro forma invoice provides a buyer with an idea of what to expect. It can also be used to provide an audit trail for accounts receivable and revenues. It is legally binding, meaning that if it isn't paid by the buyer, the seller may seek remediation. The objective of a commercial invoice is to inform the buyer about the amount due for goods and services provided. However, a pro forma invoice is issued before order placement. Under a commercial invoice, the issue date is done prior to payment being made. It is not a binding agreement, and cannot be used for bookkeeping purposes. It provides the particulars of goods and services yet to be delivered. On the other hand, a pro forma invoice is a written proposal sent prior to billing. It is a request for payment from the buyer. DefinitionĪ commercial invoice is sent to a buyer after a sale has occurred. While an invoice is a commercial instrument that states the total amount due, the pro forma invoice is a declaration by the seller to provide products and services by a specified date. What Are the Key Differences Between an Invoice and Pro Forma Invoice? Pro forma invoices may be used by a variety of businesses.
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