In the world of international trade and shipping, paperwork is king. Two documents that often cause confusion are the Proforma Invoice and the Commercial Invoice.

They look almost identical. They contain much of the same information. Yet, using the wrong one at the wrong time can lead to delayed shipments, customs fines, or accounting nightmares.

This guide will clarify exactly what each document is for, when to use it, and why the distinction matters.

Definitions

Proforma Invoice

A preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. It is a "good faith" estimate of the cost, describing the items, price, and terms. It is NOT a legal demand for payment.

Commercial Invoice

The final, legal document between the buyer and seller. It is issued after the sale is confirmed and goods are ready to ship. It is used for customs declaration and accounting. It IS a legal demand for payment.

Key Differences at a Glance

Feature	Proforma Invoice	Commercial Invoice
Purpose	Quotation / Estimate / Pre-agreement	Final Bill / Customs Declaration
Timing	Before goods are shipped	When goods are shipped/delivered
Accounting	No (Do not record in Accounts Payable/Receivable)	Yes (Record as a transaction)
Payment	Used to issue Advance Payments	Used for Final Settlement
Customs	Sometimes used for permits/licenses	Mandatory for calculating duties/taxes
Binding?	Generally non-binding (can change)	Legally binding

When to Use a Proforma Invoice

Think of a Proforma Invoice as a "Draft Invoice" or a formal quote.

Quoting a Price: When a customer asks, "How much will 100 units cost with shipping to France?" you send a Proforma.
Securing Financing: Buyers often need a Proforma to show their bank to get a Letter of Credit or import financing.
Import Licenses: Some countries require a Proforma to issue an import permit before the goods can even be shipped.
Advance Payments: If you require a 50% deposit, you issue a Proforma so the client knows what they are paying for.

When to Use a Commercial Invoice

This is the "Real Deal."

Shipping Goods: Customs officers use this document to determine the value of the goods and calculate tariffs, duties, and VAT.
Requesting Final Payment: This tells the buyer, "The goods are on the way, pay the balance now."
Accounting Records: Your accountant needs this document to prove income and calculate taxes.

What Must Be Included?

Both documents should contain:

Buyer and Seller details (Name, Address, Phone).
Date and Invoice Number.
Description of Goods (Quantity, Weight, Unit Price).
Incoterms: (e.g., FOB, CIF, EXW) defining who pays for shipping and insurance.
Country of Origin.

Crucial for Commercial Invoices: The values must be 100% accurate. Under-declaring value on a Commercial Invoice to save on taxes is fraud and can lead to severe penalties.

Frequently Asked Questions

1. Can I pay using a Proforma Invoice?

Yes, for advance payments or deposits. However, you should always ask for a final Commercial Invoice later for your tax records.

2. Can I use a Proforma for Customs?

Rarely. Most customs authorities demand a Commercial Invoice. If you send a Proforma, they may reject the shipment or delay it while asking for the final bill.

3. Can the price change between Proforma and Commercial?

Yes. Shipping costs might fluctuate, or the quantity shipped might change slightly. The Commercial Invoice must reflect the actual final reality.

4. Do I need to sign them?

Commercial Invoices for international shipping usually require a signature and a stamp to be valid for customs.

5. Is a Proforma Invoice a contract?

It can serve as a binding agreement if the buyer signs it and returns it, indicating acceptance of the price and terms.

6. What if I'm sending a gift or sample?

You still need a Commercial Invoice for customs, but you can mark it as "Sample - No Commercial Value" and state a nominal value (e.g., $1) for customs purposes only.

Conclusion: Get Your Paperwork Right

Mixing up these two documents is a rookie mistake that can cost you time and money at the border. Use Proforma for negotiation and planning. Use Commercial for execution, shipping, and accounting.

Create Both in Seconds

With Invoicely, you can create a Proforma Invoice to send to your client, and with one click, convert it into a Commercial Invoice when you are ready to ship. No re-typing required.

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