What is a pro forma invoice?
A pro forma invoice is sent to a buyer in advance of a shipment or delivery of goods or services. A pro forma invoice usually includes an accurate sale price as well as a description of the purchased items, and important information relating to shipping costs.
Pro forma meaning
Pro forma is a way of calculating financial results based on presumptions or projections. It is a Latin term that means “for the sake of form” or “as a matter of form”.
Why are pro forma invoices used and when are they sent?
Pro forma invoices are used to give customers, who are placing an order with a company, an idea of how much the products and services are likely to cost them. It provides a provisional bill of sales that is sent after a customer has committed to buying the goods or services but hasn’t yet finalised the details of the sale or received the goods.
The invoice will describe the goods or services being sold and the total amount payable plus any taxes or fees that may be incurred to avoid subjecting the customer to any unexpected charges. The customer will agree to the price on the pro forma invoice first and then receive the goods.
Pro forma invoices are used to try and ensure a smooth sales process. Everything is agreed up front and in good faith, the customer is clear on what they are receiving and for what cost and the seller knows that the client is happy with the deal. This should hopefully prevent any discord with the customer once the goods are received and the final invoice is sent.
Understanding a pro forma invoice
A pro forma invoice is not a request for payment unlike a final invoice and it isn’t legally binding. The pro forma invoice will, like an invoice, describe the items and number of units being purchased plus any associated costs, including customs charges. If the business is international then details of applicable taxes, currency exchange and shipping costs are also included. The details and costs included in a pro forma invoice can be subject to negotiation or change from both seller and buyer and many updated pro forma’s may be sent before the customer is happy with the details. There should be no unexpected changes to the customer from the final pro forma as its objective is to give the client the most precise estimate possible.
As it isn’t a final invoice it doesn’t require a unique sequential number and does not get included in accounting records as the customer has at that point not agreed to the terms so it has no fiscal value.
What is the main difference between an invoice and a pro forma invoice?
While a traditional information contains a great deal of information including things like the buyer’s and seller’s details, goods or services provided and payment terms, a pro forma invoice requires only general information to allow customs to calculate duties from a quick examination of the products included.
What information should you include on a pro forma invoice?
A precise sale price is included on most pro forma invoices, as well as an estimate of any fees related with shipping costs or taxes. Pro forma invoices can often be subject to change, however they are generally regarded as estimates that help to avoid the buyer paying unexpected, large charges further down the line.
Advantages of a pro forma invoice:
- Helps to ensure a smooth sales process
- Includes all the required relevant information that the customer needs
- Not a legal binding agreement so the details can be changed or negotiated
- Provides an understanding of the commitment to both buyer and seller
- Serves as a useful check for errors and misunderstandings
- Can be used as a stand in if all the details for a commercial invoice are not available
- Can help with a company’s internal purchase process which often require a pro forma invoice
Have you thought about Invoice Finance as a cash flow solution for your business?
Invoice finance allows you to release cash quickly from your unpaid invoices.
As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.
We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.
The benefits of invoice finance companies such as Novuna Business cash flow
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Competent staff, slick technology. Would recommend
Halo is one of the smartest bits of tech I have seen & every team is only as good a it's people and I would like to take this time to actually specifically point out Alex Hall & Claire Davies. Alex is an account manager that has continually improved during our time working together and is a real credit to Novuna. Claire has been exceptional from start to finish; meticulous in her work and very patient with us at every temp - an absolute star. It is a shame that the email address went to a generic platform and not each individual. I totally understand why this works better for companies but it did mean that the personal element was lost meaning that starts like Claire will be harder to identify from a customer point of view.
High recommedation for Novuna Business Cashflow.
My company was in need of invoice factoring to assist with the cashflow due to the nature of debtor days with our clients. After looking at a number of options, the right decision was made to work in partnership with Novuna Business Cashflow. Right from setup through sales to customer service, the communication and support has been outstanding. Providing me with all the information I needed regarding new clients coming onto our books. The system they use is so user friendly and the drawdown payments are very efficient in the fast moving world of temporary payroll. This has allowed my company to look at positive growth knowing we are safe financial hands. I would highly recommend Novuna Business Cashflow 10/10.
Set up went well and communication was good.
Syed and Vipul were extremely helpful top class service
Very helpful from the start
Great people made this process very straightforward.
Jemma from Novuna (formally Hitachi) was brilliant. Worked with us throughout the process and succeeded when some others had failed. Carried out the necessary checks with a smile and cheery demeanour, making what would have been a laborious process quite manageable.
Teething problems -Maybe ?
It's still early days so I may alter this review at a later date. However with retentions and concentration limits and other items, were finding were not getting 85% up front, were probably getting nearer 70% Also when a customer pays the remaining allegedly 15% due to us seems not to be credited to become available. For instance a customer paid Â£6918 and a customer paid Â£1300 hence we should see an extra Â£1330 available (15% of both these payments). However availability seemed to go down and not up by Â£1330 !!! Hard to work out where this 15% has actually gone ? I'll re-submit this review when things become clearer.
I found Hitachi true to their world in every aspect of the service they promised. I can't recommend enough.
Excellent Customer care and service.
Excellent customer service from start of initial conversations, right through to finally becoming a customer. The whole team involved are a credit to Hitachi, they were accommodating and informative the whole way along the process. I would highly recommend Hitachi to future clients and business associates. Thanks Alan.
I really enjoyed working with the Hitachi team, professional, helpful and really good people to deal with. They have made what could have been a very difficult experience a pleasure. Very happy to recommend them.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
Staff excellent all together professional
Great service so far
From start to finish the process for transferring our invoice finance to Hitachi has been been brilliant, a smooth transition, great communication our link Person Jonathan Oakes has helped the process go through seamlessly, A great experience so far and a brilliant start to what we hope will be a long term partnership.