In the world of invoicing, the "Proforma" is a unique document. It sits somewhere between a Quotation and a Commercial Invoice. Using it correctly can speed up customs clearance, secure upfront payments, and establish a professional relationship with international buyers.
Proforma Invoice Definition
A Proforma Invoice is a preliminary bill of sale. It is sent to a buyer before the goods are shipped or delivered.
Unlike a standard invoice, a Proforma Invoice is not a legal demand for payment (and therefore, you don't use it for accounting/tax purposes yet). It creates a "good faith" agreement on the price, quantity, and shipping details.
When to Use It
- International Trade (Customs): Customs agents often require a Proforma Invoice to calculate duties and taxes before the goods arrive.
- Securing Financing: A buyer might need a Proforma Invoice to show their bank to get a Letter of Credit to pay you.
- Advance Payments: If you require a deposit before starting work, you send a Proforma Invoice to request that payment.
- Internal Budgeting: Some companies require a Proforma before they can approve a purchase order, so their finance team can allocate budget.
Key Differences from a Regular Invoice
- It is clearly labeled "PROFORMA INVOICE" (not "INVOICE")
- It is not recorded as accounts receivable
- It does not trigger tax obligations
- The amounts may be estimates that could change before final invoicing
- It typically includes estimated shipping costs and delivery timelines