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Starting a business

What is A Proforma Invoice?

A pro forma invoice is a preliminary bill of sale sent to buyers in advance of the delivery of goods. Learn how and when to use them for your business.

Whether you like it or not, invoicing is an essential part of running a business. Issuing invoices to customers promptly and paying your invoices from suppliers on time keeps cash flowing into your business and maintains good relationships with your supply chain. But what about pro forma invoices?

In this blog post, we’re going to take a closer look at the pro forma invoice, meaning a bill of sale for your customers before you deliver your services (sometimes written as ‘pro forma invoice’). We’ll help you understand what a pro forma invoice is, how it differs from a standard invoice, and when your business should use it.

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What is a pro forma invoice?

A pro forma invoice is a bill of sale that you send to a customer before your business delivers its goods and services. It usually contains details such as a description of the items being sold, their price, and the total amount payable, along with any taxes and fees incurred. This information gives your customer as precise an estimate as possible of the expected cost of their order.


The main difference between a pro forma invoice and a standard commercial invoice is that a pro forma invoice is preliminary or provisional, which means its details are subject to change. A pro forma invoice doesn’t require an invoice number and should be clearly labelled with the term ‘pro forma’.

What is the purpose of a pro forma invoice?

A pro forma invoice can be a useful addition to any business’s sales process. It gives customers a good faith estimate of the cost of a sale and reduces the likelihood that they are exposed to any unanticipated charges, reducing the risk of payment disputes when commercial invoices are issued.

A few scenarios where pro forma invoices are commonly used include:

  • When you’re declaring the value of goods to customs when exporting to foreign countries
  • When you don’t have all the details to issue a commercial invoice
  • When you need something to act as a formal payment request when a recipient wishes to pay in advance

What is the difference between an invoice and a pro forma invoice?

There are several key differences between standard commercial invoices and pro forma invoices:

Key difference

Commercial invoice

Pro forma invoice

Time of issue

Issued to customers after goods or services have been received.

Issued to customers before an order has been placed.

Objective

To inform the buyer of the amount due and how to make payment.

To help your customer decide whether or not to place an order.

Details included

An invoice number, contact information, issue date, amount payable, means of payment, billing address, and terms and conditions.

Contact details, date of issue, a description of the goods and services, and the amount due. It requires an invoice number and should be clearly labelled as ‘pro forma’.

Accounting

A commercial invoice should be recorded as accounts payable and filed for reference.

Pro forma invoices are not used for accounting purposes.

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What is the difference between a pro forma invoice and an estimate?

In many ways, a pro forma invoice has more in common with an estimate than a commercial invoice. Estimates and pro forma invoices are both used at similar points in the sales process and provide your customer with information about their transaction. However, there are also crucial differences between a pro forma invoice and an estimate.

An estimate provides information about what your customer can expect from their transaction before it has been agreed upon.

A pro forma invoice typically provides full and final details once your customer has committed to a transaction.

When should you send a pro forma invoice?

There are two main reasons why businesses may send a pro forma invoice before a sale is completed:

  • Cost estimate: Pro forma invoices provide customers with a breakdown of the items they’ve requested and provide an accurate indication of their total amount due. The pro forma invoice is not a payment request and can still be adjusted if the goods and services you provide are being negotiated.
  • International shipping: Pro forma invoices are commonly used by export companies and include details about shipping, packaging, weight, and delivery fees. They also provide a clear declaration of the value of items so they can quickly pass through customs.

Is a pro forma invoice legally binding?

A pro forma invoice is a business document, but it’s not legally binding. A pro forma invoice typically provides a price estimate for a business’s product or service. It is not, however, a legal record of sale and, therefore, cannot be used as evidence for a completed transaction.

What should a pro forma invoice look like?

A pro forma invoice usually includes the following details:

  • Date of issue
  • Your contact details
  • A description of the goods and services you provide
  • The price of the goods and services you provide
  • Taxes or fees that apply
  • Applicable shipping costs
  • The total amount due

How do you create a pro forma invoice?

Wondering how to make a pro forma invoice? This section has you covered. A pro forma invoice can be created using free templates from our Tools & Templates hub.

Alternatively, QuickBooks’ invoicing software contains templates that you can use to create pro forma invoices in just a few clicks. You don’t need to wrestle with time-consuming updating or double-checking of invoice numbers, making QuickBooks’ software a simple way to send error-free invoices, fast.

Can you pay on a pro forma invoice?

A pro forma invoice is not a legal document, which means your customer is not legally obliged to pay the amount it lists. Instead, you need to issue a commercial invoice with an invoice number to request payment. Pro forma invoices can’t be used to reclaim tax, either.

Frequently asked questions

Streamline your sales process

Although pro forma invoices are not essential to every business, they can play an important role in your sales process.

While similar to both estimates and commercial invoices, a pro forma invoice serves a unique purpose and can help you get the most out of your invoicing software.

Send out pro forma invoices for your business with invoicing software like QuickBooks Online. You can easily switch between foreign currencies to accurately estimate your pricing for your customers worldwide and record transactions in various currencies. Try it free today.

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