A proforma invoice looks like an invoice but is not one. It is a preview of what the final invoice will say, sent before the goods or services are delivered. People often need one for customs, for internal approval or to arrange payment in advance. Here is what it is, when to use it and how it differs from the invoices and quotes you already know.
What a proforma invoice is
"Proforma" means "for the sake of form". A proforma invoice lists the items, quantities, prices, shipping, taxes and total that you expect to charge, but it is not a demand for payment and not a tax document. It says: if this order goes ahead, this is what the invoice will look like. Because it is not the real invoice, it normally carries a different number series and the words "Proforma invoice" clearly in the title.
When you would use one
- Exports and imports. Customs authorities or the buyer's bank may ask for a document showing the value and nature of the goods before they ship. Requirements vary by country, so check what applies to you.
- Advance payment. If the buyer must pay before you ship, a proforma lets them arrange the transfer, and gives you a clear record of what was agreed.
- Internal approval. A company's finance team may need a document to approve spending or raise a purchase order before they will accept an order.
- Funding and letters of credit. Banks sometimes ask for one to support financing or trade arrangements.
How it differs from a quote and a commercial invoice
A quote is an offer, sent when the buyer is still deciding. A proforma invoice is usually sent once the buyer has decided to go ahead, or is close to it, and needs a formal document for the next step. A commercial invoice is the final record of a sale, used for payment and customs once the goods are shipped. The proforma previews it. Our guide on quotes and invoices covers the other two.
What to include
List the seller and buyer details, the date and a unique proforma number, a description of each item with quantity and unit price, shipping and insurance costs if you charge them, taxes where relevant, the currency, the total, and the payment terms. For international shipments, include the delivery terms, the country of origin of the goods and any commodity codes your customs authority expects. A statement such as "This proforma invoice is not a request for payment and not a tax invoice" avoids confusion.
A short example
An exporter agrees to supply 200 units at 15 each, which is 3,000. Freight is quoted at 250, so the total is 3,250. The buyer asks for a proforma invoice so their bank can arrange a 50% advance, which is 1,625. The exporter issues a proforma for the full 3,250, noting the 50% prepayment and the balance due before shipping. After the goods are sent, the exporter issues the commercial invoice, referring to the proforma number.
Is it legally binding?
A proforma invoice is not a tax invoice, but it can still record the terms both sides have agreed, and the buyer's acceptance may support a contract. Treat the figures as a commitment, and issue a new one if anything changes. Rules differ by country, so ask for advice on anything large.
Turning it into the final invoice
When the order ships, issue the real invoice with its own number and the right tax details. Reference the proforma number so the two can be matched. Do not reuse the proforma number for the final invoice, and do not treat a proforma as if it were income in your accounts.
Common mistakes
The usual ones are missing the words "proforma" in the title, so the buyer thinks it is a real invoice, using the same number series as your invoices, letting figures drift between the proforma and the final invoice, and leaving out details customs will need. Keep the wording simple and the numbers consistent.
Validity and prices
Costs, exchange rates and freight charges move, so say how long the proforma stays valid, for example 30 days. If the buyer pays after that, reissue it with current figures. A proforma with no validity period can leave you honouring a price that no longer works.
Currency and exchange rates
State the currency clearly. If the buyer will pay in a different currency, decide in advance who bears the exchange-rate risk and say so on the document. Remember that bank transfer fees can reduce what actually arrives, and agree who pays them.
Keep the paper trail
Keep the proforma, the buyer's acceptance, the payment confirmation and the shipping documents together. In a dispute or a customs query, being able to show how the order moved from proforma to commercial invoice is far more useful than explaining it from memory.
Create one
You can create a proforma-style document with our free invoice generator by changing the Title to "Proforma invoice" and adding the statement above in the notes. Then switch to a normal invoice when the order is confirmed. This guide is general information, not trade or tax advice.
