Definition: what is a proforma invoice?

A proforma invoice resembles a quote, but with a more official character, as well as an invoice, without including all its terms. This hybrid between different sales documents has no legal value. However, it is a relevant tool for legitimizing your commercial credibility. On the other hand, it proves essential for international trade if you export goods. Here is why and how to use the proforma invoice. (You’ll find downloadable templates at the end of the article.)

The proforma invoice: definition

The proforma invoice is similar to a quote sent to a client before accepting a deal, but it turns out to be more precise and more formal.

“Pro forma” in Latin literally means “for the form.” The proforma invoice serves as an official quote and is presented in the form of an invoice. This means it must show the subject of the transaction and its price, as well as more details on the sales terms than a standard quote.

The proforma invoice is mostly used in B2B rather than B2C. Public works, construction companies, service providers, and goods sellers are the most frequent users of this document.

The proforma invoice is also widely used in international trade.

What is a proforma invoice?

The purpose of the proforma invoice is to formally define the value of a transaction, which is why it is comparable to a quote. It comes before the sale, the service, or the shipment of a good. It also accompanies packages delivered abroad, foreshadowing the invoice the client will receive afterward.

The proforma invoice facilitates exchanges ahead of a transaction between a service provider or a seller and their client. It allows all the sales terms and the terms and conditions of sale to be specified. The client is thus informed of the amount that will be invoiced once the transaction is completed.

The proforma invoice is not a mandatory document, unlike the invoice. However, since it precisely details the sales terms, it can become legally binding in the event of a dispute between the provider and the client.

Uses of the proforma invoice

Order acceptance and advance payment

The proforma invoice can be considered an official quote or a confirmed purchase order. Presented in the form of an invoice, it includes a set of details that inform the client if they proceed. Since it is sent ahead of the transaction, it allows verification that both parties to the sale agree on the terms of the deal.

The proforma invoice is sometimes used to request an advance payment on the goods. It is by definition provisional and must be replaced by an invoice to obtain the balance of payment.

Proof for the bank or a supplier

A proforma invoice validated by a client serves as proof that a sale is underway. An entrepreneur may need it to request an overdraft facility or a loan from a bank. They may also request a payment deadline from the supplier who provides raw materials, acts as a subcontractor, or positions themselves as an intermediary in the case of a resale (manufacturer or wholesaler, upstream of the retailer).

Customs value declaration

The proforma invoice is often used for the international export of goods. It is attached to the shipment to serve as a customs value declaration. It specifies the reason the package is crossing the border: sale, free sample, gift, return for refusal, or after-sales service.

Reassuring the prospect

The proforma invoice, although having no legal value, tends to reassure a somewhat hesitant prospect. This argument is even more valid for large deals. More formal than a quote, it can also be much more detailed.

It is recommended to use it with clients you sense are cautious, but whose need is real. They sometimes only need a small psychological nudge to confirm the sale. They are reassured by the thoroughness of the details on the proforma invoice, which specifies all the sales terms to them.

You can systematize the use of the proforma invoice or reserve it for certain clients only. It’s up to you to judge the influence it has on your customer base depending on your line of business and the amount of your transactions.

Using the proforma invoice for international transactions is highly recommended. This is even more important for a first sale, when your prospect doesn’t know you yet. They may have doubts about your seriousness, and even question the existence of your company if your exchanges are limited to emails or correspondence through a website.

How to write a proforma invoice

What’s the difference with a quote or an invoice

• The proforma invoice does not have to be numbered, but nothing stops you from adding a number to it.
• Having no legal, tax, or accounting value, it is not included in your bookkeeping.
• It can be modified and reissued, unlike an invoice, which must be credited or cancelled if it needs to be corrected.
• The proforma invoice indicates the market value, but has no commercial value.
• The proforma invoice cannot be used to demand payment.

The elements of a proforma invoice

To clearly mark its difference from a quote or an invoice, you must clearly state “Proforma Invoice” on the document.

There is no mandatory list of details, but it is recommended to specify as many details as possible, including:

• supplier identification;
• client identification;
• prospect’s name;
• proforma invoice number;
• issue date;
• details of the services or goods;
• quantities;
• pre-tax rate;
• VAT;
• delivery time;
• payment terms and conditions;
• validity period of the offer;
• any applicable deductions;
• terms and conditions of sale;
• order reference that will later appear on the invoice;
• special notes.

When issuing a proforma invoice intended for abroad that you attach to your shipment, add the following details:

• purpose of the shipment for customs;
• Incoterm: pickup location, insurance, and transfer of ownership;
• currency used for the transaction;
• delivery point;
• insurance;
• customs fees;
• shipping date.

Here is an example of a proforma invoice

Here is a proforma invoice example in Excel that will serve as a base for issuing your own invoices. We suggest you download it, then customize it to your colors.

Add your logo, use the typography of your other business documents, as well as any colors associated with your brand. When a client receives your proforma invoice, they should identify you instantly, thanks to your visual identity.

Also customize the details that aren’t all necessary depending on your line of business. Add the specifics related to your trade.

Download a proforma invoice template in PDF format

To download invoice templates, see this article.