5 October 2023 5 minutes

What is a commercial invoice and why is it important?

A commercial invoice is not the regular invoice as we know it. In fact, it's an integral part of international trade. We delve into what a commercial invoice is, plus why it's so important for conducting business across borders.
What is a commercial invoice and why is it important?

When we talk about a 'commercial invoice', we aren’t talking about the normal business invoice you would expect when charging (or being charged) for products or services. A commercial invoice is slightly different and is a required document for the export and import clearance process.

If you run your business operations across borders, it's highly likely that you’ve come across a commercial invoice. If this is the first time you’re hearing of one, don’t worry. We delve into what a commercial invoice is, plus everything you need to know about how it works in this blog.

 

What is a commercial invoice?

An invoice is a document that records a transaction between a buyer and a seller. A commercial invoice is slightly different. It is a type of invoice that is particularly used with international trade, as it provides the details required for crossing the international border, such as country of origin.

 

Importance of a commercial invoice in international trade

A commercial invoice is one of the key documents required for international trade and customs clearance – mainly because it's one of the primary records of the buyer-seller transaction. It also acts as evidence for things like:
  • Proof of sale
  • Valuation of goods
  • Verification of origin
  • Trade statistics
  • Insurance
  • Much more 
 

When should a commercial invoice be provided?

So, when exactly do you need a commercial invoice? Well, a commercial invoice is required during the export and import clearance process. For businesses based in Europe and the United Kingdom (UK), a commercial invoice is required when:
  • You are sending a package to a country outside of the EU using a postal service like PostNL (Netherlands) or Royal Mail (UK). 
  • You are making ecommerce shipments.
 

What are the key differences between a commercial invoice vs proforma?

A commercial invoice and a proforma invoice are both important documents for international trade, but there are a few key differences to be aware of. Let’s explore some of those.


1. Purpose and usage


In terms of its purpose, a commercial invoice confirms the sale and is necessary for receiving payment from the buyer. It is used in the actual shipment of goods and is a mandatory requirement for customs clearance. On the other hand, a proforma invoice generally gives the buyer an estimate of costs, and is used before the goods are shipped. 


2. The legalities 


Between a commercial invoice and a proforma invoice, a commercial invoice holds more legal weight as it is a binding document between the buyer and seller. It’s also used for customs checks and determines appropriate customs duties. A proforma invoice, on the other hand, doesn’t have the same legal standing. That’s because, as mentioned above, it doesn’t confirm the actual sale; it only provides an estimate for the buyer.

 

3. When it's issued


Now that we know a commercial invoice is what confirms the sale, and the proforma invoice provides an estimate to the buyer, this gives us a clue as to what stage in the journey both of these are provided. 
Due to its purpose, the commercial invoice is issued after the sale has been finalised, whereas the proforma invoice is issued before (during the negotiation stage).

 

What are the other invoices importers and exporters should be aware of?

There are a range of invoices you’ll come across when conducting business overseas. As well as a commercial invoice and a proforma invoice, you may also come across:
 
  • A sales invoice: this invoice is mainly sent to request payment for a product or service.
  • Consolidated invoice: groups a customer’s existing invoices into a single invoice with one grand total.
  • Retainer invoice: to collect prepayments for work to be done in the near future.
  • Recurring invoice: as the name suggests, it is sent on a recurring basis for repeated products and services.
 

How to fill out a commercial invoice

Now that we know what a commercial invoice is, as well as the other invoices you can expect when conducting business overseas, let’s go over the information you’ll need to fill one out. Here’s how to fill out a commercial invoice step-by-step:

 

  1. Seller/exporter details: if you’re the exporter, you’ll need to provide your business name, address, contact information and tax number.
  2. Buyer/importer details: Next you'll need to fill out the buyer (or importer) details – so name, address, contact details and tax number if required.
  3. Reason for export: here you’ll need to select the appropriate reason.
  4. Invoice number: for this, you’ll need to assign a unique identifier or reference number for the transaction. This is essential for tracking and referencing the shipment.
  5. Date of issue: fill out the date the invoice was created
  6. Description of goods: for this, you’ll need to list each item in the shipment and provide a clear description of each product – including quantity, unit price, and total price.
 
As commercial invoices cover international trade, you’ll also need to include the Harmonized System (HS) code and the country of origin for each product. Other information you’ll also likely need to include are:
 
  • Value of goods
  • Terms of sale
  • Shipping details (such as the mode of transport e.g., air, sea, rail).
  • Payment terms (i.e. via bank transfer)
  • Banking Details
 
It’s worth noting that if the payment is to be made via a bank transfer, you’ll need to provide necessary bank information such as the bank name, address, account number, and SWIFT/BIC or IBAN. If you need local IBAN details, 3S Money offers local IBANs with our International Business Account. Check your eligibility for one today.
 

Common mistakes to avoid when creating a commercial invoice

Getting the information on your commercial invoice right is crucial. If not completed correctly, this can cause errors, delays and even legal issues – all of which can have a negative impact on your business. We highlight some of the common mistakes importers and exporters often make so that you can avoid them.

 

Common mistakes include:

 
  • Incomplete or missing details
  • Inaccurate description of goods
  • Omitting the Harmonized System (HS) Code
  • Not Including Necessary Declarations
  • Miscalculations (always double-check figures for accuracy to avoid any miscalculations)
 

Expand to overseas markets with 3S Money

Though you wouldn’t immediately think it, commercial invoices are an integral part of the international trade process, helping many businesses expand to new overseas markets. We’re big on helping businesses access new markets and offer bespoke business accounts to suit the needs of your enterprise, whatever its size. Join the hundreds of clients who are already using 3S Money to reach new markets.

 

FAQs

Meet the authors

Sharyh Murray

Author

Sharyh is the lead Content Writer at 3S Money with a strong background in crafting high-quality, compelling fintech and FX-related articles. With extensive expertise in the field, Sharyh's writing resonates with a variety of audiences and drives action among readers, whatever the financial topic.

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