What is a pro forma invoice and how to create one

Like all invoices, a pro forma invoice outlines a sale between a buyer and a seller—but there’s more to it than meets the eye. Although it resembles a regular invoice, a pro forma invoice serves a distinct purpose and can’t be used interchangeably with standard invoices. 

Understanding the key distinctions is important for managing your accounts payable and avoiding costly mistakes. This article covers everything you need to know. 

Here’s what we’ll cover: 

Pro forma invoice meaning

A pro forma invoice is an estimated invoice sent to the buyer before goods or services are delivered, outlining costs and terms, and sometimes used to request advance payment. It lists what you’re selling, the total amount, and key details about the transaction. 

Looking at invoice definitions, a regular invoice is a document showing what’s owed for goods or services you have delivered. The pro forma version is essentially a “good faith” promise between you and the buyer, so they know what to expect. 

For example, if you need payment upfront to lock in financing before you can make the goods or deliver the service, a pro forma invoice lays out all these details before any work is done. 

It’s not an actual request for payment. It confirms some details whilst letting the buyer know of any other parts that still need to be finalised. In that sense, a pro forma invoice is closer to a quote or estimate than an invoice.

Is a pro forma invoice legally binding?

Although it includes many of the same details as a final sales invoice, a pro forma invoice is not legally enforceable in the UK. You can’t use it for statutory accounting, VAT reporting, or as a binding contract. 

Your customer doesn’t have to pay what’s listed, and it won’t show up in their accounts payable or your accounts receivable.

Can a pro forma invoice be cancelled?

A pro forma invoice is just a preview of a potential transaction based on what your buyer has ordered, so cancellation isn’t necessary.

What is a pro forma invoice used for?

Pro forma invoices help both buyers and sellers understand the terms of the agreement, including pricing, items, and delivery details. It’s not a demand for payment, but can form the basis for agreeing on prices and terms.

Why do businesses use pro forma invoices?

Issuing a pro forma invoice means you’re giving your buyer a heads-up about what to expect in terms of cost, delivery, and other details, like commission. It keeps things clear and can help prevent surprises or disagreements down the line, once the goods or services are delivered. 

Pro forma invoices are often used by UK businesses for custom orders or when goods need to clear international customs. 

Pro forma invoices are good for custom orders, as they make your buyer aware of how much their requested item will cost upfront before production starts.

When should a business send a pro forma invoice?

A pro forma invoice is usually sent when an order is placed, well before shipping. 

It’s a way to confirm the details and pricing upfront and avoid having to go back and forth later. It’s especially useful if you’re dealing with international shipments.

What’s in a pro forma invoice?

A pro forma invoice is packed with information. Here are the details of what makes up this preliminary document: 

• Detailed descriptions of the goods: including the country of origin and the correct product classification (such as the Harmonised System (HS) code or UK commodity code used by HMRC to calculate duties and taxes). 

• Price of the products: the cost of your goods and/or services 

• Delivery terms: where’s the package coming from, and where’s it going? When can the customer expect delivery? 

• Validity or expiration date: how long is the stated price good for? 

• The term “pro forma invoice”: let the buyer know it’s just a preview, not the final bill. 

Check out our entire range of free invoice templates.

Pro forma invoice example

As an example of a pro forma invoice in action, imagine you work for a veterinary group and get an order for 1,000 pet care packages. Instead of jumping straight into packing, you send a pro forma invoice with the price, delivery date, payment terms, and any discounts. 

This allows the buyer to review the details and negotiate if needed. Once everyone’s on the same page, you finalise the pro forma, start packing, and then send the actual invoice. It’s a smoother way to manage orders and avoid last-minute mix-ups.

Sample pro forma invoice template

 Of course, the format of a pro forma invoice can vary depending on the nature of your business and products or services. But we’ve outlined a basic template below for illustrative purposes: 

Seller information: 

Company Name: _________________________ 

Address: _______________________________ 

Phone: ________________________________ 

Email: ________________________________ 

Buyer information: 

Company Name: ________________________ 

Address: _______________________________ 

Phone: _________________________________ 

Email: _________________________________ 

Invoice number: _________________________ 

Invoice date: ____________________________ 

Payment due date: _______________________ 

Itemised list of goods/services: 

Item Description	Quantity	Unit Price	Total Price
________	________	________	________
________	________	________	________
________	________	________	________

Subtotal: ___________ 

Tax (if applicable): ___________ 

Shipping costs: ___________ 

Total amount due: ___________ 

Terms & conditions: 

Payment due by: ___________________________ 

Delivery date: _____________________________ 

Other terms: _____________________________ 

Signature: ___________________________ 

Date: ________________________________ 

What are the benefits of using a pro forma invoice? 

Using a pro forma invoice offers several key benefits for both buyers and sellers: 

• Transparency: it’s like a clear window into the deal, showing both sides exactly what’s agreed upon. 

• Streamlines sales process: it makes things smoother between the seller and buyer before the purchase is locked in. There will be less back and forth and more getting things done. 

• Tool for negotiations: since it’s not a final bill, both sides can use it to tweak terms or make changes to the order. 

Disadvantages of a pro forma invoice

Whilst pro forma invoices have their perks, they’re not without their downsides: 

• Potential for misunderstanding: customers might get confused and think it’s the actual invoice. This could lead to payment mix-ups. 

• Absence of legal weight: these aren’t legally binding, so you can’t force your customer to pay just because you sent one. If a buyer backs out, you could lose out if you’ve already started making the products/working on the services. 

• Possible changes in final cost: the pro forma might not match the final bill if costs or taxes change, potentially leading to arguments about what’s actually owed. 

Pro forma invoice versus invoice

Let’s look at the difference between a pro forma invoice and a regular invoice. This will also give you an idea of how to write an invoice that really works. 

	Pro forma invoice	Invoice
Purpose	Preview of terms and costs	Final request for payment
Legally binding	No	Yes
Uses	Early estimate, pre-sale negotiation	Final sale confirmation, payment requested
Flexibility	Can be adjusted before final deal	Fixed and final. No changes allowed

Pro forma invoice versus commercial invoice

Pro forma invoices are useful in international trade, particularly when goods are being shipped before a final commercial invoice is available. They can help customs authorities and couriers estimate duties and VAT in advance.

	Pro forma invoice	Commercial invoice
Purpose	Initial estimate, not a demand for payment	Official document for payment and customs
Legally binding	No	Yes
Use case	Pre-sale, negotiation, or customs estimate	Final sale, payment collection, HMRC requirements
Detail level	Can be much less detailed	Must include detailed transaction info

Pro forma invoice versus purchase order

A pro forma invoice is a preview of costs and terms, whilst a purchase order is a formal request from the buyer to buy something. Here’s how they differ. 

	Pro forma invoice	Purchase order
Purpose	Estimate and terms preview	Buyer’s formal request to purchase
Legally binding	No	Yes, once accepted by the seller
Use	Inform buyer of costs and terms	Confirm what buyer wants to buy
Initiator	Seller’s document	Buyer’s document

Cloud-based invoicing software simplifies managing pro forma invoices 

Pro forma invoices can make your business life easier by keeping things transparent and organised before the sale is final. However, you need to make sure your clients or customers know that what they’re being given is not the final invoice. 

Leverage powerful cloud-based invoicing software to cut down on errors, get paid faster, and have all your invoicing needs at your fingertips, whether you’re in the office or on the move: 

• Save time and money: issue invoices quickly, reduce errors, and cut costs. 

• Automate invoicing: generate, send, track and manage invoices automatically. 

• Create accurate digital invoices: avoid disputes and simplify billing. 

• Receive payments on time: guarantee that invoices reach clients promptly with clear payment terms. 

• Manage invoices on the go: access and manage your invoices anytime, anywhere. 

Get started today and see how automated invoicing software can streamline your business.