Paperwork and customs
What a proforma invoice is for.
A proforma invoice is a formal offer stating exactly what will be supplied, at what price, on what terms. It is not a demand for payment and it is not proof of anything having happened. It is what a deposit is paid against and what a bank drafts a credit from.
What it has to say.
A proforma restates the agreed quotation in a form other parties can act on. Your bank, your broker and your insurer all read it, and each of them needs specific things from it.
- Seller and buyer, in full
- Legal names and addresses as they appear on registrations. This is where a mismatch between the quoting company and the invoicing company first becomes visible, and it is worth checking.
- Description and quantity
- Enough detail that a customs officer can classify it and an inspector can check it. A vague description here becomes a query at the border.
- Unit price, total and currency
- Broken down, so a partial shipment or a discrepancy can be worked out without a new document.
- Incoterm and named place
- Which decides what the total includes. A proforma without one is not a price anybody can act on.
- Payment terms and the bank account
- Percentage, trigger, and the account in the seller's own name. If the account is in a different name from the seller, stop and ask why before anything moves.
- Validity
- How long the offer stands, because a proforma from six weeks ago may not reflect the current price.
- Port of loading and destination
- Which the forwarder and the insurer both need, and which decides several documents downstream.
What it is not.
It is not a commercial invoice. The commercial invoice is issued when the goods ship and it is what customs values the entry on. Sending a proforma to a broker as though it were the commercial invoice is a common and avoidable delay.
It is not proof that a company exists, that they make anything, or that they own the goods. It is a document produced on somebody's own letterhead. A buyer using a proforma as reassurance has confused a formality with a verification.
It is also not, by itself, a contract. It records terms, and whether those terms bind depends on what else was agreed. For anything substantial the proforma sits alongside a purchase order or a contract rather than instead of one.
The check worth doing on every one.
Match three names: the company on the proforma, the company on the business registration, and the name on the bank account. Two out of three matching is the most common shape of a loss in this trade, and it is visible before any money moves.
Then check that the Incoterm on the proforma is the one you agreed, because it is the line most often changed quietly between quotation and proforma, and it moves real cost between the parties.
Questions buyers ask.
Can I pay against a proforma alone?
People do it constantly and it is where deposits disappear. The proforma tells you what was offered. It tells you nothing about whether the company makes anything or whether the account belongs to them. Do the registration and account check first, every time, including on the fifth order.
Why does the proforma differ from the quotation?
Sometimes because something was clarified, and sometimes because a term moved. Compare them line by line, particularly the Incoterm, the packing and the payment trigger. A change nobody mentioned is worth a question rather than a signature.
Do I need a separate contract?
For a small first order many buyers work from a proforma and a purchase order. For anything substantial or ongoing, a contract that covers inspection, failure, delay and dispute is worth having, because a proforma does not address any of them.
Read next.
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How to verify an Indonesian supplier
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The plainest documents in the set and the ones that stop the most shipments, because customs and the bank read them against everything else.
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