How Does the Proforma Invoice Process WorkĪ Proforma invoice holds significant importance to maintain the cash flow in a business. It includes all the required details for payment like Tax/VAT info, method of payment, currency, due date, etc. It legally binds the client to release the due payment in return for the ordered goods and services. On the other hand, a simple invoice is a financial instrument issued by the supplier/vendor after a sale is complete. Unlike an invoice, a proforma invoice doesn’t contain an invoice number and hence is not legally binding. A proforma invoice is not a final invoice since the billing details can be changed during the process. Its primary objective is to set clear expectations by the seller about the deliverables and give a brief overview of the products and services yet to be delivered. Understanding their differences & using them can help you streamline the sales processes of your business.Ī proforma invoice informs the buyer about the estimated billing prior to the order placement. However, understanding their functionality is sometimes confusing due to their in-between nature. ✔ Functions as the primary source for the seller to create an official invoice after the sale is confirmed.Īs a seller or freelancer, you should be familiar with the usage of invoices and proforma invoices for commercial purposes. ✔ Use to upgrade your invoicing process.

✔ Helps in sustaining smooth workflow and managing the cash flow in a business by disregarding any money-losing mistakes. ✔ Serves as a medium of clear communication b/w both parties. ✔ Provides the necessary details to the buyer about the products or services, time-line, & estimated cost to set clear expectations. ✔ Helps in estimating the final cost and net profit on the promised goods and services to prevent you from audit problems. ✔ Portrays you as a proactive, professional, and trusted seller. ✔ Since it’s not the final invoice, a proforma invoice saves you from needless admin if any change occurs in the price and deliverables. ✔ Prevents any conflict and dispute between the buyer & the seller. ✔ Ensures that the buyer and the seller are on the same page. Here are some of the benefits of using a digital proforma invoice: Automating your invoicing has profound advantages for a business as well as underlying benefits for the buyer and seller. Small business owners and independent sellers often use a proforma invoice to declare the value and specifications of the deliverables.

Free proforma invoice