All you need to know about proforma invoicing
All you need to know about proforma invoicing
If you’re a business owner, you’ll be all too familiar with the world of invoicing. Generating and sending invoices is one of the most crucial tasks of running a business. After all, collecting them on time ensures that your cash flow management is stable and healthy.
Proforma invoices are a great addition to the invoicing process, but they often get overlooked. If you aren't yet utilising them for your business, then you may not be getting the most out of your invoicing software.
So, what is a proforma invoice? It is a business's commitment to delivering goods or services to its customers. A proforma invoice outlines the work, goods, or services that will be provided, alongside the quantity and price.
Despite its name, a proforma invoice is not an invoice; so you can’t use it for accounting purposes. It’s also not a payment request. However, it assures your customers that they will not face any unexpected charges if they purchase from you.
What is a proforma invoice?
A proforma invoice - meaning 'as a matter of form' in Latin - is a type of invoice that gets raised before an order is confirmed to create a sale. While a proforma is not a legal document, you can use it as a quote or estimate for goods and services that you commit to selling.
Sending a proforma invoice ensures that both the seller and customer are on the same page. It represents a commitment between the two parties, but in a format that can be adjusted when needed. So, it creates a good faith agreement and allows the customer to know what to expect ahead of time.
A proforma can be valuable when a less formal document such as a delivery note is insufficient, but it's too early to issue a standard invoice. If the payment needs to be upfront, you can use a proforma invoice to propose the transaction details and ensure sufficient finance before manufacturing goods or supplying a service.
Proforma invoices are also a great opportunity to let your customers explore if they’ll be able to get extended payment terms with iwocaPay. Being able to spread the cost of the invoices will help your customers make more affordable payments – meaning you can make bigger sales.
Some businesses use proforma invoices as part of their internal purchase approval process. It's also helpful for international shipping as they often include packaging, shipping, weight, and delivery fee details.
Read on to find out how proforma invoices compare to standard invoices.
Proforma invoice vs a standard invoice
While a proforma invoice is a declaration by the seller to provide products and services at a specified rate and date, an invoice states the total amount that is due to be paid by the buyer.
Proforma invoice vs invoice
Proforma invoice template
A proforma invoice lets businesses send a preliminary bill of sale to their customers before completing work or requesting payment. But sending a proforma invoice doesn't mean you have to spend time manually entering the same information each time.
Save yourself valuable time and download a proforma invoice template instead. Then all you’ll need to do is update the relevant information. In no time at all, you'll be able to send a personalised and professional-looking proforma invoice.
While proforma invoices may not always be necessary, they can be used as an integral part of your sales process and easily created using an invoice template.
How iwocaPay can help turn proforma invoices into bigger sales
Proforma invoices are a great way to introduce your customers to iwocaPay. When you add your iwocaPay payment link to your proforma invoices, business customers can check their eligibility for getting extended terms through Pay Later. Giving your customers the opportunity to spread the cost of their invoices over 90 days means bigger sales become more affordable.
When you’re ready to send the invoice, your customers will already know they have the option to pay over 90 days. Your unique payment link can be added anywhere you take payments or negotiate sales: invoices, emails, or text messages. It’s even integrated with your Xero account, making it even easier to take payments & reconcile invoices.
To find out more about how iwoca can help your business, call us today on 02037780629 or email us at firstname.lastname@example.org.
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