Proforma invoice: what it is and when to use one

A proforma invoice looks like an invoice, but it arrives before the sale is complete. Exporters, wholesalers and service businesses use it to set out exactly what will be supplied and at what price, so the buyer can arrange payment, paperwork or approval. Here is what it is, when to use one, what to put on it, and how it differs from a quote and a commercial invoice.

What is a proforma invoice?

A proforma invoice is a preliminary invoice that describes a sale before it happens: the goods or services, quantities, prices, and the terms on which the seller is prepared to supply them. The term is also written “pro forma”, from the Latin for “as a matter of form”.

It is the seller’s good-faith statement of what the final invoice will look like. Two things set it apart from a regular invoice:

• It is not a demand for payment. It describes what the buyer will owe if the sale goes ahead, rather than recording money that is already owed.
• It is not a tax invoice. It is not used to account for tax or to reclaim it, and it isn’t recorded as a sale in the seller’s books.

When the sale actually happens, the seller issues a standard invoice (or, for exports, a commercial invoice) with its own invoice number. Our guide to what an invoice is covers the standard version.

When is a proforma invoice used?

International shipping and customs

In international trade, a proforma invoice gives the buyer the details they need before goods arrive: what is coming, what it is worth, and where it comes from. Depending on the country, importers may need it to apply for an import license or permit, or to prepare customs clearance in advance. For shipments that don’t involve a sale, such as free samples, replacements or items sent for repair, shippers often use a proforma invoice to declare the value for customs. Exact requirements depend on the countries and the carrier involved.

Advance payment

When a seller wants payment before shipping goods or starting work, a proforma invoice tells the buyer exactly what they are paying for. This is common with new customers, custom orders and international sales. Once payment arrives, or the goods ship, the seller issues the final invoice.

Letters of credit and financing

Buyers paying by letter of credit, or arranging trade finance, often give the proforma invoice to their bank. It sets out the goods, price and terms on which the letter of credit or loan can be based.

Internal approval

Many organizations need a document before they can approve spending or raise a purchase order. A proforma invoice gives the buyer’s purchasing or finance team firm figures to sign off on.

What to include on a proforma invoice

Most of the fields match a standard invoice, with a few additions for shipped goods:

• The title “Proforma invoice”, clearly shown, so nobody mistakes it for a final invoice.
• A proforma number from its own series, such as PF-0001, kept separate from your invoice numbers.
• The date, and how long the offer is valid. Prices and availability change.
• Seller and buyer details, including a ship-to address if different.
• Description of goods or services, with quantities, unit prices and line totals.
• Currency. Especially important for international sales.
• Estimated shipping, insurance and other charges, if they apply.
• For physical goods: country of origin, tariff (HS) codes, weights and dimensions, and the Incoterms (for example FOB or DAP) that define who pays for what in transit.
• Payment terms and payment details, including any advance payment required.
• Expected delivery or shipping date.
• A note that it is not a tax invoice. Many businesses add a line such as “This is not a tax invoice” to avoid confusion.

Proforma invoice vs commercial invoice vs quote

These three documents often appear in the same deal, at different stages.

A quote is the start of a conversation. A proforma invoice is closer to a commitment: the details have usually been agreed, and the buyer is preparing to pay or import. If you are still negotiating, a quote is usually the right document.

Not a tax invoice, not a demand for payment

This is the point that causes the most confusion, so it is worth repeating:

• A buyer generally can’t use a proforma invoice to reclaim VAT or GST. In the EU and UK, for example, that requires a VAT invoice showing the supplier’s VAT number, the VAT rate and the VAT amount.
• A seller shouldn’t treat a proforma invoice as income or as money owed to them.
• Proforma numbers shouldn’t use up numbers from your invoice series. Keep them separate so your invoice sequence stays complete. Our guide to numbering invoices explains why that matters.

Also be aware that in some VAT systems, receiving an advance payment can itself create a point at which tax becomes due, so a proper invoice may be needed as soon as the money arrives rather than when the goods ship. Rules vary by country, so check what applies to you.

How to make a proforma invoice

With KeenInvoice, it takes a few minutes:

1. Open the proforma invoice generator.
2. Add your business details and logo, then the buyer’s details and a ship-to address if needed.
3. Set the proforma number and date, and add the validity period in the notes or terms.
4. Add the line items, currency, tax (if you want to show the expected amount), shipping and any discount.
5. Use custom fields for trade details such as HS codes, country of origin or Incoterms.
6. Add payment terms and payment details, especially if you’re asking for advance payment.
7. Pick a design and, if your buyer works in another language, set the document language to English, Japanese, Spanish or German. Then download the PDF.

Everything is saved in your browser and listed in My documents. When it is time to issue the real invoice, create it in the invoice generator: your business details carry over, and clients and items autocomplete from your past documents, so there is little to retype.

Create your proforma invoice

If you need to send a buyer firm figures before the sale goes through, the proforma invoice generator gives you a clean, clearly labeled PDF in minutes. It’s free, needs no sign-up, and nothing you type leaves your browser.