While it can get complex, making and knowing the different kinds of invoices is one thing all businesses should know about. But, if you want to grow a business and not put your entire time into accounting then it is a must to have automated invoicing software. Also, it is important to understand the difference between Proforma and final invoices.
Proforma invoices vs invoices
Invoices are simply used to list out the goods/services purchased by buyers. They are issued by the vendor and are supposed to have all details related to the sale.
Standard invoices and proforma invoices have more or less the same information, but have different purposes. It can get very difficult to understand the two as pro forma income statements are not a legal binding.
What is a proforma invoice?
Contrary to commercial invoices, proforma invoices are made before sale. They are more like quotes and also known as dummy invoices. Besides, they are prepared by the seller and offers details like:
- The types of services/goods requested and their physical specifications.
- Price estimates, cost per product, and total amount that will be charged
- Terms and conditions of sale with the delivery dates
When it comes to getting the proforma invoice format right and making it with online invoicing software, make sure everything is crystal clear and you can assure the buyer of your services and make it easier for them to raise a purchase order.
If they ask for a proforma invoice, it indicates that they are more interested in purchasing your services and don’t need a regular quote. They are committed to making the purchase, but need to fix the details and get the facts right before entering into an agreement with the exporter and seller.
A point to be noted here is that don’t number these invoices in your automated invoicing software as they are not a legal binding. First, the buyers need to send out a purchase order, make a sales agreement, and then issue an invoice number for the sale.
If you are a customer you are not needed to pay the amount listed on proforma invoices. As these invoices are not recorded, businesses cannot use them for reclaiming taxes. So, it is safe to say they don’t have a direct financial impact on both parties for accounting purposes.
Businesses that use online invoicing software will find it helpful to create commercial invoices as they can use the information entered to populate the invoice and save on time and labor. Besides, a proforma invoice can also be considered as a temporary bill for custom purposes in international trade. Thus, make sure you use them for the right purpose and don’t confuse them.
While you can always negotiate on a proforma invoice, it is not possible with a commercial one as it is a legal binding. As an actual sale has occurred, once an invoice has been made correctly, it is “set in stone”.
Automated invoicing software can help you make them with ease. Besides, you can even add payment links for the same in the invoice to get faster payments. Just make sure you add the following information:
- An invoice number
- Date of issue
- Product descriptions or services
- Product price
- Discounts offered (if any)
- Total amount due after adding all taxes
Differences between proforma and regular invoice
A pro forma income statement will help you make strategic decisions, analyze what the vendor has to say, and see how to deal with all the information. Whereas, you need to check the details of a final invoice with a good invoice generator software and clear the payment.
While proforma documents are not recorded, it is still important to get the proforma invoice format right. It is possible that you lose out on an order due to incorrect details. Similar to the former, commercial invoices reflect a legal transaction.
Using all this information will help you design both invoices in the right manner. We suggest using online invoicing software that offers multiple invoice templates and lets you segregate your files as per their purpose.
Luckily, online invoicing software can help you make the best proforma invoices and final invoices. You also get access to multiple proforma invoice templates and other automation features to make your job easy. Invoice generator software also helps you track the stages of invoices. You can check if your client has seen the invoice and the payment method they plan to pay you with. So, if you have still not jumped on the train, it is high-time you did. If you wish to test out our automated invoicing software, you can call us at +1-805-491-9393 or write to us at email@example.com.