How Does the Proforma Invoice Fit in the Export Process?

So, you want to make an outstanding first impression? You have seven seconds. Studies show that positive (or negative) business impressions are made almost immediately—in person.

Can the same thing be said for first impressions when you aren’t working face to face with a potential customer? I think so.

In the world of exporting, one of the best ways to make a positive, lasting first impression is to provide a proforma invoice for your prospective buyers. When it comes down to it, the proforma invoice really is the first impression you will make on your buyers, so it’s pivotal to make your buyer’s experience a pleasant one.

The First Export Document You Create

In most cases, the proforma invoice will be the first export document you create. When a potential buyer expresses interest in your product, they will send a letter of inquiry outlining the terms of their interest along with a request for an informal or formal quote. That request is your cue to create a proforma invoice.

The proforma invoice acts like a quote and looks like a commercial invoice. It can be used to arrange a letter of credit to pay for the goods or, if needed, to arrange financing for the purchase. If the proforma invoice is done correctly and results in an order, the final commercial invoice will closely resemble the proforma invoice. That means all of the costs included in the quotation are firm and are not allowed to vary more than a letter of credit allows, if that is how the payment is arranged.

Certain countries may require a proforma invoice if they tightly control their currency exchange rate, require an import permit, or protect local industry by placing import quotas on certain types of goods.

Features and Benefits of the Proforma Invoice

• It serves as a negotiating tool between you and your international customer. Ideally, you want the proforma invoice to be as close to the commercial invoice as possible.
• It is a voluntary document, and it is the preferred method in the exporting business. It’s good form to include a proforma invoice whether or not it is requested.
• It is a blueprint for the entire export process. When it’s correctly completed, it contains several key pieces of information that will be used on many of the export forms, including a final export invoice, you'll need to create later.
• All proforma invoices should be valid for a specific period of time. When you’re completing a proforma invoice, keep in mind that material and manufacturing prices can rise, inland and international transportation fees can change, and currency exchange rates can fluctuate. Depending on the international trade term (typically one of the Incoterms 2020 terms) you and your buyer agree to use, you, as the exporter, may be responsible for these and other fluctuating costs.

What’s Included on the Proforma Invoice

A typical proforma invoice will include at least the following:

• Price for your products.
• Description of the goods, including the correct six-digit Harmonized System or Schedule B number, which the buyer will use to determine any duties and taxes.
• Delivery terms usually expressed as one of the Incoterms 2020 terms.
• Payment terms.
• Delivery details, including where the goods will originate and where they will be delivered.
• An expiration date.

An international proforma invoice will be more detailed than a domestic quotation, and should include the following 12 items:

1. Seller’s and buyer’s names and addresses.
2. Buyer’s reference number and date of inquiry.
3. List of requested products and a brief description.
4. Price of each item (in U.S. dollars).
5. Delivery point.
6. Terms of sale.
7. Terms of payment.
8. Insurance and shipping costs.
9. Validity period for quotation.
10. Total charges to be paid by customer.
11. Estimated shipping date from a U.S. port or airport.
12. Currency of sale.

In addition, the document should be clearly marked as a Proforma Invoice and include two statements:

• One that certifies the proforma invoice is true and correct.
• Another that indicates the country of origin of the goods.

What to Expect After Sending

After you send the prospective buyer the proforma invoice, the rest of the sales process is set in motion. The buyer will have the option to purchase, negotiate the terms, or not follow through on the sale. Because the export proforma invoice is not used for payment purposes, if the potential customer decides to purchase your goods based on the provided quote, they will secure payment, by opening a letter of credit or otherwise, and begin the process of paying you for your goods.

The proforma invoice is your first, most influential chance to making a lasting impression, so there’s no room for error. Download a free PDF version of our proforma invoice, and you can be sure you’re including all of the necessary information.

This article was first published in April 2015 and has been updated to include current information, links and formatting.