Invoicing basics
What is a proforma invoice?
What a proforma invoice is, when it's used in international trade and deposit billing, and how it compares to a commercial invoice and an estimate.
Key takeaways
- A proforma invoice is a preliminary document that shows what the final invoice will look like.
- It's commonly used in international trade, for advance payments, and to support purchase approvals.
- It generally isn't a final demand for payment and isn't recorded as revenue.
- Once goods ship or work is delivered, issue a final commercial invoice with its own number.
A proforma invoice is a preliminary bill of sale. It tells a buyer, in invoice format, exactly what they'll be charged once an order is confirmed and delivered: the items, quantities, prices, shipping, and terms. The name comes from the Latin "pro forma," meaning "as a matter of form."
It looks like an invoice, but it isn't a request for payment in the usual sense. Think of it as a detailed, good-faith statement of what the final invoice will say.
When a proforma invoice is used
International trade
Exporters often send a proforma invoice before shipping. The buyer may need it to arrange financing, open a letter of credit, or apply for an import license. Customs authorities may also ask for one in certain situations, for example when goods are shipped as free samples and there's no commercial sale. Requirements vary by country, so check with your freight forwarder, customs broker, or the destination's customs authority.
Advance payments and deposits
When a client must pay before work begins or goods are produced, a proforma invoice gives them a formal document to pay against. A furniture maker taking a 50% deposit on a $6,000 custom order might send a proforma showing the full order and the $3,000 due upfront.
Internal approvals
Some companies require a proforma invoice before a purchase can be approved. It gives the buyer's finance team something concrete to review, budget for, and attach to a purchase order.
Orders still being finalized
If quantities, shipping costs, or delivery dates may still shift slightly, a proforma lets both sides agree on the expected figures before the final invoice is issued.
Proforma vs. commercial invoice
The commercial invoice is the final document for a sale. In international shipping, it's typically the document customs uses to assess duties and taxes.
| Proforma invoice | Commercial invoice | |
|---|---|---|
| Timing | Before delivery or shipment | At or after delivery or shipment |
| Purpose | Preview the sale; support approvals and advance payment | Request payment and document the final sale |
| Accounting | Generally not recorded as revenue or a receivable | Recorded in your books |
| Can it change? | Yes, details may be revised before the sale is final | Changes typically require a credit note or a new invoice |
| Customs | Accepted only in specific cases, such as samples | Typically the main document for duties and taxes |
| Label | Clearly marked "Proforma Invoice" | Marked "Invoice" or "Commercial Invoice" |
For the same order, the two documents should match closely. Large unexplained differences, especially in declared values, can create problems with a buyer's financing or with customs. If something changes between the two, note the reason on the commercial invoice.
Proforma invoice vs. estimate
Both come before the sale, and both show expected costs. The difference is commitment and precision.
- An estimate is an approximation, often given early, when the scope or cost may still change. See how to write an estimate.
- A proforma invoice usually comes later, after the buyer has agreed to buy. It reflects the specific order and is formatted like the final invoice, with full seller and buyer details, terms, and often shipping information.
A common sequence for a larger order is: estimate or quote, then acceptance or a purchase order, then a proforma invoice if one is needed, then the commercial invoice, and finally a receipt.
What to include on a proforma invoice
- The heading "Proforma Invoice", displayed prominently
- Seller and buyer names, addresses, and contact details
- A reference number and issue date
- A description of the goods or services, with quantities and unit prices
- Estimated shipping, insurance, and other charges
- Payment terms, including any advance payment required
- For international shipments: country of origin, product classification codes, weights, and the agreed Incoterms rule, if applicable
- A validity period and the expected delivery date
Here's how the line items might look for a small coffee roaster shipping to a café abroad:
| Description | Qty | Unit price | Amount |
|---|---|---|---|
| Whole-bean coffee, 1 kg bags | 120 | $18.00 | $2,160.00 |
| Freight to destination (estimated) | 1 | $340.00 | $340.00 |
| Cargo insurance (estimated) | 1 | $45.00 | $45.00 |
| Total (estimated) | $2,545.00 |
Marking freight and insurance as estimates tells the buyer which figures may change on the final invoice and which are fixed.
From proforma to final invoice
Here is how the furniture order from earlier might move from proforma to final invoice:
- Send proforma PF-0012 for the $6,000 order, showing a $3,000 deposit due before production.
- Receive the deposit, and issue a receipt if the buyer asks for one.
- Build and deliver the furniture.
- Issue commercial invoice INV-0215 for $6,000, reference PF-0012, deduct the $3,000 already paid, and show $3,000 due.
The final invoice is what your bookkeeping and, where relevant, customs rely on, so it must reflect what was actually delivered and charged. If anything changed since the proforma, such as a different shipping cost, the commercial invoice should show the actual figures.
A few mistakes to avoid along the way:
- Recording the proforma as a sale. It inflates revenue for a sale that hasn't happened yet.
- Reusing the proforma number on the final invoice. The commercial invoice needs its own number from your main sequence.
- Leaving out a validity period. Prices and freight costs change. State how long the figures hold.
Create one in minutes
A proforma invoice uses the same structure as a standard invoice, with a clear label and the expected figures. Start from the free invoice generator or one of our invoice templates, label the document clearly as a proforma, and use a separate number series. For a refresher on the standard document, see what is an invoice.