luckpandaA proforma invoice is a preliminary invoice a seller sends before the goods are shipped or the work is done. It looks like an invoice and lists the same details, but it is a statement of what the final invoice will be, not a demand for payment of a completed sale.
"Pro forma" is Latin for "as a matter of form". The document gives the buyer everything they need to approve a purchase, arrange finance, pay an advance or apply for an import licence, before the real invoice exists.
What a proforma invoice is used for
- Requesting an advance payment. Many sellers ask for full or part payment before they ship or start work. A proforma shows the buyer exactly what they are paying for.
- Imports and customs. Buyers often need a proforma to apply for an import licence, open a letter of credit, or arrange foreign currency payment through their bank. Customs may accept it to estimate duty before the commercial invoice arrives.
- Internal approval. A buyer's purchasing or finance team may need a proforma to raise a purchase order or approve budget.
- Confirming terms. It fixes the price, quantities, delivery terms and payment terms both sides have agreed.
What a proforma invoice is not
A proforma is not a tax invoice, and it is not recorded as a sale in your books. That has practical consequences:
- You do not record revenue or a receivable when you issue a proforma. The sale is recorded when you issue the final invoice.
- The buyer cannot use a proforma to reclaim VAT or GST. They need the final tax invoice.
- In the UK, HMRC does not treat a proforma as a VAT invoice. It is good practice to mark it clearly with words such as "This is not a VAT invoice".
- In India, GST is not charged on a proforma itself. A tax invoice must be issued at the time of supply as set out in the GST law. If you receive an advance for services, a receipt voucher is normally required, and GST may be due on that advance.
Tax treatment of advances differs by country and by whether you supply goods or services. Ask your accountant how advances should be handled in your case.
What to put on a proforma invoice
Include everything the final invoice will have, so the buyer can approve it without surprises:
- The words "Proforma invoice" as the title, so nobody mistakes it for a tax invoice.
- Your details and the buyer's details.
- A reference number and date. Use a separate series from your tax invoices, such as PF-2026-0007.
- A description of the goods or services, with quantities, unit prices and totals.
- Estimated tax, shown as it will appear on the final invoice.
- For goods: weights, dimensions, HS codes, country of origin and Incoterms such as FOB or CIF, if the buyer will use it for customs or finance.
- Payment terms, the advance requested, and how to pay.
- A validity date for the prices quoted.
An example
A furniture maker in India is shipping to a buyer in Germany who has asked for a proforma to arrange payment. The buyer pays in euros.
| Description | Qty | Unit price | Amount |
|---|---|---|---|
| Teak dining table | 4 | 1.250,00 € | 5.000,00 € |
| Teak chairs | 24 | 180,00 € | 4.320,00 € |
| Packing and freight to Hamburg (CIF) | 1 | 960,00 € | 960,00 € |
| Total | 10.280,00 € | ||
| Advance requested (30%) | 3.084,00 € |
Once the advance is paid and the goods are shipped, the seller issues a commercial invoice for the full amount, showing the advance received and the balance due.
Proforma invoice vs quote vs invoice
These three documents follow a sale from offer to payment. They differ in purpose and in their legal and accounting weight.
| Quote | Proforma invoice | Invoice | |
|---|---|---|---|
| When | Before the buyer agrees | After agreement, before supply | At or after supply |
| Purpose | Offer a price | Confirm terms, request an advance or support an import | Request payment for a supply |
| Binding | An offer the buyer can accept | Shows agreed terms; not a demand for payment of a completed sale | A record of a sale and an amount owed |
| Recorded in accounts | No | No | Yes, as revenue and a receivable |
| Valid for tax claims | No | No | Yes, if it meets tax invoice rules |
| Numbering | Quote series | Proforma series | Tax invoice series |
A quote says "this is what it would cost". A proforma says "this is what you are buying, on these terms". An invoice says "you owe this for what we supplied". You can build a quote with our quote generator and turn it into a proforma once the client accepts.
Turning a proforma into the final invoice
- Wait for the buyer's confirmation, purchase order or advance payment.
- Supply the goods or services.
- Issue a tax invoice with a number from your normal invoice series. Copy the agreed details from the proforma, adjusting for any changes in quantities or prices.
- Show any advance already paid as a deduction, so the invoice shows the balance due.
- Keep the proforma on file with the invoice as part of the trail.
Do not convert the proforma by changing its title. The final invoice must come from your tax invoice series so that your numbering has no gaps.
Proforma invoice vs commercial invoice
In international trade, the commercial invoice is the final invoice for goods, used by customs to clear the shipment and calculate duty. The proforma comes earlier and is based on expected values. Customs may accept a proforma provisionally, but the commercial invoice must follow. If prices or quantities change between the two, the commercial invoice is the one that counts.
When not to use a proforma
If you have already supplied the goods or services, send a real invoice. Using a proforma to delay issuing a tax invoice can put you outside the time limits that VAT and GST rules set for invoicing. A proforma is also unnecessary for small domestic jobs where a quote and a final invoice do the job.