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Pro forma invoice – what is it, and when is it issued in Bulgaria ?

02.11.2023
Pro forma invoice – what is it, and when is it issued in Bulgaria ?

The proforma invoice is a document we often see in business, but we do not always understand its full function and meaning. This document plays a key role in many commercial and financial processes and it is important to understand how to use it correctly

Initial definitions and key features

A proforma invoice is a preliminary invoice or quote that a company issues to its customer before the actual delivery of the goods or services has taken place. It serves to provide detailed information about the upcoming transaction, such as price, quantity, terms of delivery, etc.

It is important to note that the pro forma invoice is not an official document for binding payment. It provides information but does not constitute an obligation to pay on the part of the customer.

Why do companies use proforma invoices?

Proforma invoices are used by businesses for several reasons

  • Setting expectations: They provide customers with a clear idea of what they can expect in the end result of the transaction.
  • Basis for a contract: They can serve as a starting point for a contract between the seller and the buyer.
  • Process facilitation: They help to make it easier to prepare the final invoice after the service has been performed or the goods delivered.

What information does the pro forma invoice contain?

It may contain different information, but usually includes the following basic elements

  • Name and address of the seller and buyer.
  • A description of the goods or services.
  • Quantity and price.
  • Total value of the transaction.
  • Terms of delivery and payment.
  • Date of issue and validity of the proforma.

Difference between proforma invoice and standard invoice?

Although both are invoices, there are key differences between them

  • Legal value: a pro forma invoice has no legal value and cannot be used as proof of sale or as a basis for payment.
  • Purpose: A standard invoice is issued after a transaction has taken place and serves as confirmation of the sale, whereas a pro forma invoice is an offer to transact.
  • Period of validity: The pro forma invoice usually has a certain period of validity, after which it loses its validity.

When should a pro forma invoice be issued?

This document is issued in several cases

  • When the customer wants preliminary information about the price and terms of the transaction.
  • In international transactions, when information needs to be provided to customs or other regulatory authorities.
  • When the seller wants to confirm the details of the transaction before proceeding.

Using a pro forma invoice in electronic format

In the digital age we live in, more and more businesses are choosing to use proforma invoices in electronic format. This provides a number of benefits, such as speeding up communication, reducing the chance of data entry errors and making archiving and tracking easier. Electronic proforma invoices also reduce printing and mailing costs and contribute to a more efficient and sustainable business model.

Possible problems and precautions

Despite the benefits of pro forma invoices, businesses need to be careful and take the necessary measures to avoid potential problems. For example, confusion can arise between a pro forma and final invoice, which can lead to misunderstandings in payments. To avoid such situations, it is important that documents are clearly labelled and communicated regularly with customers. Also, businesses should ensure that all information on the pro forma invoice is accurate and up-to-date to prevent any disputes or discrepancies in the future.

In conclusion, a pro forma invoice is an important tool in business that helps to improve communication between parties and keep transactions running smoothly. Although it has no legal value, it plays a key role in the preliminary phase of many commercial transactions.

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