What is Proforma Invoice? When Proforma Invoice is Prepared?

What is Proforma Invoice? Meaning

Proforma invoice is sent by a seller to the buyer before receiving the order. At times, the buyer may like to know the exact amount which he would have to pay in case he places an order. He would request the seller to give him a clear idea about the payment. In such a case, the seller prepares an invoice and sends it to the buyer. Such invoice is called Proforma Invoice.

When Proforma Invoice is Prepared?

Proforma Invoice is prepared only under certain following circumstances :-

1. When the prospective buyer is interested in knowing the exact amount of expenditure for purchasing goods.
2. When the seller is interested in receiving the payment before the delivery of goods.
3. When the goods are sent to the agent under consignment sale, to enable the consignee to know the price below which the goods should not be sold.
4. In case of foreign trade to enable the importer to pay the customs duty based on a proforma invoice.
5. In case of goods sold on an approval or return basis.
6. In case a prospective buyer asks for it.
7. When a new trader or a trader selling new products wants to inform the prospective buyers about price of goods.