What Is a Proforma Invoice? Meaning, Uses and Example
Updated
A proforma invoice is a preliminary invoice a seller sends before the goods or services are delivered, often before the sale is even final. It tells the buyer exactly what they'll get and what it will cost, so they can pay in advance, get approval or arrange shipping. Here's what it means, when to use one, and how it differs from a regular invoice and a quote.
The short answer
A proforma invoice is a detailed, invoice-style document sent before delivery that describes the goods or services, quantities, prices and terms of a sale. It's used to request advance payment, help the buyer get internal or bank approval, and prepare imports. It is not a tax invoice and isn't recorded as a sale: once the deal goes ahead, you issue a regular invoice.
When to use a proforma invoice
- To ask for payment in advance. When you need payment, or a deposit, before you ship goods or start work, especially with new customers.
- For international trade. Importers often need a proforma invoice to apply for an import license, open a letter of credit, arrange foreign currency or prepare customs paperwork.
- For the buyer's approval. Many companies need a formal document to raise a purchase order or get budget sign-off before they can buy.
- When details may still change. If the final weight, quantity or shipping cost isn't known yet, a proforma sets out the expected sale without committing the final figures.
- For samples and free shipments, where there's no sale but the shipment still needs a declared value.
Proforma invoice vs invoice
| Proforma invoice | Invoice | |
|---|---|---|
| Sent | Before delivery, often before the sale is confirmed | After the sale is confirmed, usually after delivery |
| Purpose | Describe the sale, request advance payment | Request payment that is now owed |
| Binding | Generally no, it's an offer | Yes, a record of a completed sale |
| Tax | Not a tax invoice, can't reclaim VAT/GST | Can be a tax invoice |
| Accounting | Not recorded as a sale | Recorded as a sale and money owed |
| Numbering | Its own reference, e.g. PF-0042 | Your sequential invoice number |
| Title | "Proforma Invoice" | "Invoice" or "Tax Invoice" |
Proforma invoice vs quote
A quote and a proforma invoice both come before the sale, but they're used at different moments:
- A quote (or estimate) is for agreeing on a price. It's often shorter, may offer options, and usually has an expiry date.
- A proforma invoice usually comes once the buyer has decided to buy. It's complete and formal, looks like the final invoice, and includes everything needed to pay, get approval or ship: exact quantities, delivery terms, payment instructions and, for exports, shipping details.
A typical order goes: quote → proforma invoice → payment → delivery → invoice (or receipt).
What to include on a proforma invoice
- The title "Proforma Invoice", clearly, so nobody mistakes it for a final invoice
- Your business details and the buyer's details
- A reference number and the date
- A description, quantity and price for each item
- Shipping, insurance and any taxes you expect, and the total
- Payment terms and instructions, for example "100% before shipment"
- How long the prices are valid, and the expected delivery date
- For exports: country of origin, weights and packages, Incoterms (such as FOB or CIF) and, if you know them, HS tariff codes
- A note such as "This is a proforma invoice, not a tax invoice"
Proforma invoice example
An outdoor gear company in the US sends a proforma invoice to a buyer in Peru, who needs it to pay in advance and prepare the import:
Harbor Outdoor Gear Inc.
900 Alaskan Way, Seattle, WA 98104, USA
[email protected]
PROFORMA INVOICE
# PF-0042
Bill To:
Andes Trekking S.A.C.
Av. La Marina 2350, Lima, Peru
Attn: Purchasing
| Item | Quantity | Rate | Amount |
|---|---|---|---|
| Hiking backpack 40L, model HB-40 | 50 | $38.00 | $1,900.00 |
| Trekking poles, aluminum (pair) | 60 | $14.50 | $870.00 |
| Sea freight and insurance to Callao | 1 | $420.00 | $420.00 |
Notes:
This is a proforma invoice, not a tax invoice. Prices valid for 30 days. Ships within 10 days of payment. 12 cartons, 210 kg. Country of origin: USA.
- Subtotal:
- $3,190.00
- Total:
- $3,190.00
What happens after a proforma invoice
-
The buyer accepts and pays
The buyer pays the amount requested, or sends a purchase order, based on the proforma.
-
You deliver
Ship the goods or do the work. If anything changed, such as quantities, freight or exchange rates, note it for the final invoice.
-
You issue the final invoice
Create a regular invoice with your next invoice number and the final figures. Show any advance payment as amount paid, so the balance due is zero or whatever is left. This is the document for your accounts and taxes. With a free invoices.net account, your saved customer's details fill in automatically on the new invoice.
Frequently asked questions
What does "pro forma" mean?
"Pro forma" is Latin for "as a matter of form". A proforma invoice is a document in the form of an invoice, sent in advance, that describes a sale before it is final.
Is a proforma invoice legally binding?
Generally no. A proforma invoice is a good-faith estimate and an offer, not a demand for payment that the buyer is legally obliged to pay. The commitment comes when the buyer accepts it, for example by paying or issuing a purchase order.
Can I claim VAT or GST on a proforma invoice?
No. A proforma invoice is not a tax invoice, so it cannot be used to reclaim VAT or GST or recorded as a sale in your accounts. Issue a final invoice once the sale is confirmed.
Is a proforma invoice the same as a quote?
They are similar, but a quote is mainly about agreeing on a price, while a proforma invoice is more formal and complete: it looks like the final invoice and is often used to request advance payment, arrange financing or prepare customs paperwork.
Does a proforma invoice need an invoice number?
It should have a reference so both sides can refer to it, but many businesses keep it separate from their invoice sequence, for example PF-0042, so proformas that never turn into sales do not leave gaps in invoice numbering.
Can a proforma invoice be used for customs?
Sometimes. Customs authorities in some countries accept a proforma invoice to clear goods, for example samples or shipments where the final value is not yet known, usually followed by a commercial invoice. Check the rules of the importing country or ask your freight forwarder.
What happens after a proforma invoice is paid?
Deliver the goods or services and issue a final invoice for the same sale, showing the payment already received and a balance due of zero, or a receipt. The final invoice is the one that goes into your accounts.
How do I make a proforma invoice for free?
Use the free proforma invoice generator on invoices.net: fill in the template, which is already labelled as a proforma invoice, and download it as a PDF. No sign-up needed.
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