What is a proforma invoice?
The word "proforma" comes from Latin, meaning "as a matter of form." In business, a proforma invoice is a document that looks like a real invoice but isn't one yet. It's sent in advance - before the work is finished, before goods are shipped, or before a final price is confirmed.
A proforma invoice is a preliminary document that shows what a final invoice will look like - without creating a legal obligation to pay.
Think of it as a detailed preview. The sale isn't finalised, the work isn't done, but both sides can see exactly what's coming.
Proforma invoices are common in international trade, manufacturing, and project-based work where costs need to be confirmed before a commitment is made. They're also used by freelancers and service businesses to request deposits or get sign-off on pricing before starting work.
When should you use a proforma invoice?
There's no single rule for when a proforma invoice is required - but there are several situations where it's genuinely useful:
Requesting a deposit
Send a proforma invoice before work begins to show the client exactly what they're paying a deposit against. It sets clear expectations from the start.
International shipments
Customs authorities often require a proforma invoice to assess duties and taxes before goods cross a border. It's a standard part of international trade documentation.
Client budget approval
Many companies need to get spending approved internally before committing. A proforma invoice gives their finance team something formal to approve against.
Confirming pricing
If costs might change - for example, on a project with variables - a proforma invoice locks in the expected price and avoids surprises when the real invoice arrives.
Arranging finance or credit
A buyer may need to show a proforma invoice to their bank or credit provider to arrange payment before goods are delivered.
New client relationships
With a client you haven't worked with before, a proforma invoice sets out your terms clearly before any work begins - protecting both sides.
Proforma invoice vs a real invoice
The most important distinction to understand is this: a proforma invoice is not a legal payment request. A real invoice is. Here's how they compare:
| Proforma invoice | Real invoice | |
|---|---|---|
| When it's sent | Before work is complete or goods delivered | After work is complete or goods delivered |
| Legal obligation | None - it's a preview only | Yes - payment is legally owed |
| Recorded in accounts | No - not a financial record | Yes - entered into accounts receivable |
| VAT / tax | Not applicable (no tax point created) | Creates a tax point where applicable |
| Invoice number | Optional or prefixed (e.g. PRO-001) | Required, sequential |
| Label at the top | Must say "Proforma Invoice" | Says "Invoice" |
Always label it clearly. If a document could be confused for a real invoice, it creates accounting and tax problems for both you and your client. "Proforma Invoice" should appear prominently at the top of the document.
Proforma invoice vs a quote
A quote and a proforma invoice are similar in purpose - both set out what something will cost before it's been paid for. The difference is mainly one of timing and format.
A quote is typically sent at the very start of a conversation, when you're offering to do work at a stated price. It's an offer. The client can accept or walk away.
A proforma invoice is used once the sale is essentially agreed and you're moving towards doing the work. It looks like a real invoice - with line items, totals, and payment details - and is used to formalise the expected transaction before it's complete.
In practice, many small businesses use the two terms interchangeably, and that's fine. What matters is that the document clearly states it is not yet a payment demand.
What to include on a proforma invoice
A proforma invoice should contain most of the same information as a real invoice - the key difference is the label at the top. Include the following:
The label "Proforma Invoice"
At the top, clearly and prominently. Never leave it ambiguous.
Your business details
Your name or business name, address, and contact information.
Client details
The buyer's name, company, and address.
Issue date
The date the proforma invoice was created.
Itemised description
A clear list of goods or services, quantities, and unit prices.
Total amount
The expected total, including any applicable taxes, shown clearly.
Payment terms
State what you're asking for - a deposit, full prepayment, or simply approval.
Validity period
How long the quoted price is valid. This protects you if costs change.
Once the work is complete, you'll follow up with a standard invoice that matches the proforma - adjusted for any changes agreed along the way. See our guide on what to include on a real invoice for the full checklist.
Does a proforma invoice need to be paid?
Not automatically - but it depends on how you've used it. A proforma invoice on its own is not a demand for payment. However, there are two common scenarios where payment is expected:
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Deposit requests. If you've sent a proforma invoice specifically to request a deposit before starting work, you'd expect the client to pay that amount. Make this clear in your terms - "Please pay the deposit shown to confirm your booking."
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Prepayment before delivery. For international orders or high-value goods, it's common to require full payment against the proforma invoice before anything ships. The real invoice is then issued as a record of the completed transaction.
In all other cases - such as when a proforma is sent purely for budget approval or customs purposes - no payment is expected against it. A real invoice will follow once the work is done.
Be explicit about what you want. If you do want payment against a proforma invoice, say so clearly. Don't assume the client will know whether to pay it or just file it for approval.
Frequently asked questions
What is a proforma invoice?
A proforma invoice is a preliminary document that shows what a final invoice will look like, sent before work is complete or goods are delivered. It is not a legal demand for payment.
Is a proforma invoice the same as a real invoice?
No. A real invoice creates a legal obligation to pay and is recorded in your accounts. A proforma invoice is a preview - it has no legal payment obligation and does not create a tax point.
When should I use a proforma invoice?
Use one when requesting a deposit, when a client needs formal pricing for budget approval, for international shipments requiring customs documentation, or when you want to confirm pricing before starting work.
Does a proforma invoice need to be paid?
Not automatically. It depends on how you've used it. If you've sent it to request a deposit or prepayment, then yes - make that clear in your terms. If it's purely for approval or customs, no payment is expected until the real invoice follows.
What is the difference between a proforma invoice and a quote?
A quote is an offer made early in a conversation. A proforma invoice is more formal and is used once the sale is essentially agreed - it's structured like a real invoice and used to confirm the expected transaction before it's finalised.
Should I mark a proforma invoice as proforma?
Yes, always. Label it "Proforma Invoice" clearly at the top. If it could be confused with a real invoice, it creates accounting and tax complications for both you and your client.
