What is a proforma invoice?
A proforma invoice is a document sent before delivery that states what the customer will be charged. It looks like an invoice, but it is not a demand for payment and it is not a tax document.
It exists to let a buyer see the exact figures — including shipping, duties and taxes — before committing, arranging payment or opening a letter of credit.
What a proforma invoice is for
Three situations where it is the correct document:
- International trade. The buyer needs it to arrange import permits, foreign exchange or a letter of credit before goods ship.
- Advance payment. You need payment before dispatch, and the buyer needs a formal document to process it.
- Internal approval. The buyer's finance team requires a document showing final figures before releasing a purchase order.
In each case the buyer needs something more definite than a quotation but cannot receive a real invoice yet, because nothing has been delivered.
Proforma versus quotation versus commercial invoice
| Quotation | Proforma invoice | Commercial invoice | |
|---|---|---|---|
| Purpose | Offer a price | Confirm what will be charged | Demand payment |
| Timing | Before agreement | After agreement, before delivery | On or after delivery |
| Legally demands payment | No | No | Yes |
| Tax document | No | No | Yes |
| Used by customs | No | Sometimes, for valuation | Yes |
What to include
- The words Proforma Invoice, clearly — this is the field that prevents it being treated as a payment demand.
- A reference number and date.
- Seller and buyer details.
- Full description of goods or services, with quantities and unit prices.
- Shipping terms and costs, where goods are being sent.
- Estimated taxes and duties.
- Total payable.
- A validity period. Prices and exchange rates move; state how long the figures hold.
- Payment terms and bank details if advance payment is expected.
The mistake that causes real problems
Treating a proforma as a tax invoice. It is not one, and using it as such causes two specific failures.
First, you cannot account for tax on a proforma — the tax point arises with the commercial invoice. Second, your customer cannot reclaim input tax against it. If you send a proforma, take payment and never issue the commercial invoice, your customer has paid and cannot recover the tax, and your own records are incomplete.
Always follow a proforma with a commercial invoice once goods or services are delivered.
Numbering proformas
Keep proforma numbering separate from your invoice sequence — PRO-2026-001 rather than an INV number. Mixing them creates gaps in your invoice sequence, which is exactly what auditors ask about.
When the commercial invoice is issued, reference the proforma number on it so the two are traceable to each other.
Frequently asked questions
Is a proforma invoice legally binding?
It is not a demand for payment and does not create a debt. It is a good-faith statement of what will be charged, and is usually treated as binding on the seller for its stated validity period.
Can I use a proforma invoice for tax purposes?
No. It is not a tax document. The tax point arises with the commercial invoice, and your customer cannot reclaim input tax against a proforma.
What is the difference between a proforma invoice and a quotation?
A quotation offers a price before agreement. A proforma comes after agreement and confirms the exact figures — including shipping and duties — so the buyer can arrange payment or permits.
Do I still need to send a commercial invoice?
Yes, always, once goods or services are delivered. The proforma does not replace it, and skipping it leaves both parties without a valid tax document.
How should I number proforma invoices?
In a separate sequence such as PRO-2026-001. Using your invoice sequence creates gaps in it, which is exactly what an auditor will question.
Should a proforma invoice have an expiry date?
Yes. Prices, shipping costs and exchange rates move, so state a validity period — 14 to 30 days is common.