Pro Forma

What Is A Pro Forma?

The term “pro forma” is a Latin word that loosely translates to “for form” or “as a matter of form.” So we can say, pro forma is done or exists as something usual or required, but that has little meaning or importance. Pro Forma is a document issued by the supplier to the buyer to confirm the commitment to sell goods for a specific price and at certain terms.

Deeper Definition

Pro Forma is usually sent before the ‘real’ (commercial) invoice, and it serves as a quote or preliminary invoice. A pro forma invoice is an important document to negotiate between the seller and the buyer before an export shipment. The seller should use this document to quote at the beginning of an export transaction. It will eventually become the final commercial invoice used when goods are cleared through the importing country’s customs. The document contains a description of goods (e.g., quantity, price, weight, kind and other specifications). It is a declaration by a seller to provide the products and services to the buyer at the specified date and price.

Pro forma invoices and commercial invoices should not be confused with each other as they are different documents. You should note that a pro forma invoice is a quote in an invoice format that the buyer may require to apply for an import license, contract for pre-shipment inspection, open a letter of credit or arrange for transfer of hard currency.

On the other hand, a commercial invoice is a legal document between the exporter and the buyer (in this case, the foreign buyer) that clearly states the goods being sold and the amount the customer is to pay. A commercial invoice is a bill for the goods from the seller to the buyer.

Pro Forma Example

After a series of back and forth on price haggling, Donald, a foreman at a construction company, asked for a pro forma to be sent to his office. At first, he thought he was being conned. But upon closer look at the pro forma, he realized that the seller had listed the items in order of their weights, price, quantity, unit, and other specifications, which, to his surprise, he found satisfying and requested the proper invoice.