If you’re unsure about how proforma invoices differ from commercial invoices, you’re not alone. These two types of documents may look alike, but they serve different roles in international trade. If you’re involved in importing or exporting, understanding these distinctions is crucial to ensuring smooth shipments to or from Canada.

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In this guide, we’ll break down:

• Proforma invoice

• Commercial invoice

• Customs invoice

• Who the consignee is

• How to ensure you’re paid for your international invoice

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Before diving into the various types of invoices, let’s quickly look at how to streamline payments when conducting business internationally.

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As a business owner, minimizing costs when sending or receiving money from abroad is essential. This can make it easier to manage payments to your international suppliers and work with customers in different countries. A great tool for this is a multi-currency account like the Vault account, which allows you to hold, send, and receive money in various currencies seamlessly.

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The Vault account supports same-day payments to 180+ countries in 36 different currencies. You can make overseas transfers efficiently, and any currency conversion is done at the interbank exchange rate provided by The Bank of Canada, with only a transparent fee involved. This makes Vault a cost-effective alternative to banks and other services, with savings that can add up significantly.

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Now, let’s get back to the topic at hand: the differences between various invoices.

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What is a Proforma Invoice?

A proforma invoice is prepared by a seller or supplier before shipping goods to a buyer. It outlines the agreed terms of sale, including quantities and prices, to provide the buyer with an estimate of the costs. It also allows the buyer to review the terms before proceeding with the transaction.

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The proforma invoice is essentially a preliminary bill, letting the buyer know what to expect in terms of costs. For those new to exporting, there are plenty of proforma invoice templates available online to guide you.

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What should a Proforma Invoice include?

A proforma invoice should clearly present the details of the proposed sale. This typically includes:

• Seller’s and buyer’s names and contact information

• A breakdown of the items being sold, along with their quantity and total cost

• Any relevant taxes (though it should be noted that this is not a VAT invoice)

• The total cost of the sale

• Currency of settlement, and any terms related to the sale or payment

• Information regarding the shipment, including its origin and destination

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What is a Commercial Invoice?

A commercial invoice is issued when goods are shipped, confirming the final sale and shipment details. This document is also used during customs checks, helping authorities verify the shipment, and is required for payment by the buyer.

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If you’re unfamiliar with exporting from Canada, you can either use an invoice template or work with a customs broker to ensure your invoices are correct. Since small mistakes can cause delays at customs, it’s worth the effort to get the details right.

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What should a Commercial Invoice contain?

A commercial invoice usually includes much of the same information as a proforma invoice, but with one key difference: this document reflects the final details of the transaction, including any changes that might have occurred since the proforma invoice was prepared. For instance, if stock levels changed or prices fluctuated, the commercial invoice would include those updates.

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Because this document is used by customs to verify the shipment, it must be thorough and detailed, providing information such as the type, purpose, and value of the goods being shipped. Customs authorities rely on this to ensure the shipment complies with laws and to calculate duties or taxes owed.

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Who is the Consignee on a Commercial Invoice?

Some invoice forms, including customs invoices, require the details of the consignee. The consignee is the individual or company receiving the goods, whether it’s the buyer or a third-party importer. This information is critical for ensuring the shipment reaches its intended recipient.

It’s important not to confuse the consignee with the consignor, the party responsible for shipping the goods.

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What information is needed for a Customs Invoice in Canada?

When importing goods into Canada, having the right paperwork is crucial to avoid delays. Typically, a commercial invoice is used, but in some cases, a proforma invoice can be submitted, particularly if goods are being shipped without a financial transaction involved.

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The Canadian Border Services Agency provides a Canada customs invoice template that includes all the necessary details for customs clearance. Using this template ensures that your shipment moves through customs without unnecessary delays. Both commercial and customs invoices can be combined into one document, provided all the necessary customs information is included.

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Conclusion

Understanding and properly using invoices like proforma invoices, commercial invoices, and customs invoices can make your international trade operations more efficient and reduce the likelihood of errors or delays. Consulting with a customs broker or using available invoice templates can also make the process smoother.

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And don’t forget, if you regularly deal with international suppliers or clients, managing your international payments effectively is essential. Using a Vault account can help reduce costs on international transfers, giving your business a financial edge.