Tax Glossary


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Last updated on:
March 17, 2024

A proforma invoice is essentially a preliminary bill of sale provided by a seller to a buyer before the delivery of goods or services. It outlines the items the buyer wants to purchase and gives an estimate of the costs involved. This document is especially useful in international trade and for custom declarations, as it helps buyers make decisions and arrange for payments without constituting a binding contract.

For instance, imagine you're a freelance graphic designer and a client approaches you for a branding project. The scope of the project is not fully defined yet, but the client needs an estimate to secure budget approval. You can issue a proforma invoice estimating the costs based on the initial requirements. This gives your client a clear idea of the financial commitment involved before the final details are ironed out.

Remember, a proforma invoice does not replace the final invoice, which is issued once the terms of the sale are finalized and the goods or services are ready to be delivered. It's important to communicate clearly to your client that a proforma invoice is an estimate, not a request for payment.

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