Proforma Invoice Guide — What It Is and When to Use One.

What is a proforma invoice?

A proforma invoice is a preliminary bill of sale sent to a buyer before goods are shipped or services are delivered. Think of it as a formal quote that looks like an invoice. It describes:

• What you will deliver (products or services)
• How much it will cost
• The terms of the sale (payment terms, delivery timeline, shipping method)

The word "proforma" means "as a matter of form." The document looks like an invoice but is not a demand for payment. It is a commitment from the seller about what they will provide and at what price.

Proforma invoice vs. commercial invoice

When to use a proforma invoice

1. International trade and customs

This is the most common use case. When you ship goods internationally, the destination country's customs authority often wants to see a proforma invoice before the goods arrive. It helps them assess import duties, taxes, and whether the goods meet local regulations.

The proforma invoice for customs should include:

• Seller and buyer details (full legal names and addresses)
• Detailed description of goods (HS codes if available)
• Quantity, unit price, and total value
• Currency
• Shipping terms (Incoterms like FOB, CIF)
• Country of origin
• Declaration that the document is a proforma invoice

2. Requesting advance payment

If you require payment before starting work or shipping goods, a proforma invoice serves as the formal request. The buyer uses it to process the payment through their system. Once payment is received, you issue the final commercial invoice.

This is common for:

• Custom manufacturing orders
• Large projects requiring a deposit
• New client relationships where trust is being established
• International transactions where the seller wants payment before shipping

3. Formal quotes for approval

Some organizations — especially large companies, universities, and government agencies — require a formal quote on letterhead before they can issue a purchase order. A proforma invoice serves this purpose. It looks more official than an email estimate but is not a binding invoice.

What to include on a proforma invoice

1. Clear label: "Proforma Invoice" — Do not let the buyer mistake it for a real invoice. Make the label prominent.
2. A reference number — Not your standard invoice numbering sequence. Use a separate sequence like PROF-001.
3. Your business details — Full legal name, address, contact info.
4. Buyer details — Full legal name, shipping address, contact person.
5. Detailed description of goods or services — Be as specific as possible. For international shipments, include HS codes.
6. Pricing — Unit price, quantity, total. State the currency clearly.
7. Terms — Payment terms, delivery timeline, shipping method, Incoterms for international.
8. Expiration date — How long the quote is valid. "This proforma invoice is valid for 30 days from the date of issue."
9. Statement that it is not a tax invoice — "This is a proforma invoice and not a demand for payment."

Proforma invoice and taxes

A proforma invoice is not used for tax purposes. The buyer cannot claim input tax credits or deduct the expense based on a proforma invoice. They need the final commercial invoice for that.

When you eventually issue the final invoice, reference the proforma invoice number so the buyer can match them: "Final Invoice #INV-1042, per Proforma Invoice #PROF-089."

The bottom line for small businesses

For most small service businesses — contractors, cleaners, freelancers, consultants — you probably do not need proforma invoices. A standard invoice sent after work is completed is sufficient.

You need proforma invoices if:

• You ship physical goods internationally
• You require full or partial payment before starting work
• Your clients are large organizations that require formal quotes before issuing purchase orders
• You deal with customs, freight forwarders, or import/export documentation

If you need to create one, any invoice tool that lets you customize the invoice label can create a proforma invoice. Just change the title from "Invoice" to "Proforma Invoice" and adjust the numbering.