Proforma Invoice vs Commercial Invoice: Key Differences

What is a Proforma Invoice?

A proforma invoice is a preliminary bill of sale sent to buyers before goods are delivered or services are completed. It's essentially a quote or estimate in invoice format, showing what the buyer will owe.

Key Characteristics:

• Not a demand for payment
• Sent before work/delivery
• Shows estimated costs
• Used for customs, financing, or buyer approval
• Can be modified before final invoice

What is a Commercial Invoice?

A commercial invoice is the final, official bill for goods or services. It's a legal document that demands payment and is used for accounting, customs, and tax purposes.

Key Characteristics:

• Legal demand for payment
• Sent after work/delivery
• Shows actual costs
• Required for customs clearance
• Cannot be changed (must issue credit note)

Side-by-Side Comparison

Feature	Proforma Invoice	Commercial Invoice
Purpose	Quote/Estimate	Payment demand
Timing	Before delivery	After delivery
Legal status	Not legally binding	Legally binding
Payment	Not required	Required
Customs	Preliminary only	Official document
Accounting	Not recorded	Recorded as revenue
Modifications	Can be changed	Requires credit note
Tax reporting	Not reported	Must be reported

When to Use a Proforma Invoice

1. International trade: Buyer needs it for import permits or letters of credit
2. Customs declaration: Shows value of goods being shipped
3. Advance payment: Buyer wants to see costs before paying deposit
4. Financing: Buyer needs documentation for loan approval
5. Large orders: Buyer requires formal quote before purchase order
6. Complex projects: Detailed cost breakdown needed for approval

When to Use a Commercial Invoice

1. Goods have shipped: Always required for international shipments
2. Service completed: Work is done and payment is due
3. Customs clearance: Required for import/export
4. Tax purposes: Needed for VAT, GST, or sales tax
5. Accounting: Record the sale in your books
6. Payment collection: Legal basis for demanding payment

What to Include in a Proforma Invoice

• "PROFORMA INVOICE" clearly labeled at top
• Proforma invoice number (separate from regular invoices)
• Date of issue
• Seller information (name, address, contact)
• Buyer information
• Detailed description of goods/services
• Quantity and unit price
• Total amount (estimated)
• Currency
• Payment terms (proposed)
• Delivery terms (Incoterms for international)
• Validity period ("Valid for 30 days")
• Country of origin (for goods)
• HS codes (for international shipments)

What to Include in a Commercial Invoice

• "COMMERCIAL INVOICE" or "INVOICE" at top
• Unique invoice number
• Invoice date
• Due date
• Seller information (including tax ID)
• Buyer information
• Detailed description of goods/services
• Quantity and unit price (actual)
• Subtotal, taxes, total amount due
• Currency
• Payment terms
• Payment methods
• Shipping information (if applicable)
• Country of origin
• HS codes (for international)
• Terms and conditions

Sample Proforma Invoice

PROFORMA INVOICE

Proforma Invoice #: PI-2025-001
Date: January 15, 2025
Valid Until: February 14, 2025

SELLER:
ABC Manufacturing Ltd.
123 Industrial Pkwy
Chicago, IL 60601, USA

BUYER:
XYZ Imports GmbH
456 Hauptstraße
Berlin, Germany

DESCRIPTION OF GOODS:

Item	HS Code	Qty	Unit Price	Total
Widget Model A	8479.89	1,000	$25.00	$25,000
Widget Model B	8479.89	500	$35.00	$17,500

SUBTOTAL: $42,500
SHIPPING (FOB Chicago): $2,500
TOTAL (USD): $45,000

PAYMENT TERMS: 50% deposit, balance before shipment
DELIVERY: 6-8 weeks after deposit
COUNTRY OF ORIGIN: USA

This proforma invoice is for estimation purposes only and is not a demand for payment.

Sample Commercial Invoice

COMMERCIAL INVOICE

Invoice #: INV-2025-089
Date: March 1, 2025
Payment Due: March 31, 2025 (Net 30)

SELLER:
ABC Manufacturing Ltd.
123 Industrial Pkwy
Chicago, IL 60601, USA
Tax ID: 12-3456789

BUYER:
XYZ Imports GmbH
456 Hauptstraße
Berlin, Germany
VAT: DE123456789

SHIPPED VIA: DHL Express
TRACKING: 1234567890
SHIP DATE: February 28, 2025

DESCRIPTION OF GOODS:

Item	HS Code	Qty	Unit Price	Total
Widget Model A	8479.89	1,000	$25.00	$25,000
Widget Model B	8479.89	500	$35.00	$17,500

SUBTOTAL: $42,500
SHIPPING: $2,500
TOTAL (USD): $45,000
DEPOSIT PAID: -$22,500
AMOUNT DUE: $22,500

COUNTRY OF ORIGIN: USA
INCOTERMS: FOB Chicago

Payment due by March 31, 2025. Late payments subject to 1.5% monthly interest.

Converting Proforma to Commercial Invoice

When converting a proforma invoice to a commercial invoice:

1. Change the title: Remove "PROFORMA"
2. Assign new invoice number: Use your regular invoice numbering
3. Update date: Use actual invoice/ship date
4. Add due date: When payment is required
5. Verify amounts: Ensure prices match actual costs
6. Add shipping details: Tracking, carrier, date
7. Include tax ID: For tax reporting
8. Reference proforma: "Per proforma invoice PI-2025-001"

International Trade Considerations

Customs Requirements

• Proforma: May be used for preliminary customs review
• Commercial: Required for final customs clearance
• Both: Must include HS codes, country of origin, accurate values

Incoterms

Always specify Incoterms (FOB, CIF, DDP, etc.) on both types of invoices to clarify:

• Who pays shipping
• Who handles customs
• When risk transfers

Common Mistakes to Avoid

• Using proforma for payment: It's not a legal payment request
• Not labeling clearly: Always mark "PROFORMA INVOICE"
• Inaccurate values: Customs penalties for undervaluing
• Missing HS codes: Delays customs clearance
• Wrong currency: Specify currency clearly
• No validity period: Proforma should expire

Conclusion

Understanding the difference between proforma and commercial invoices is crucial for international trade and large projects. Use proforma invoices for quotes and preliminary documentation, and commercial invoices for final payment and customs. Create both types of professional invoices with InvoiceKit!