Proforma invoice

Proforma vs. quote vs. invoice

All three describe a price before or after work happens, but they carry different weight. A quote is an offer the client can accept or reject. A proforma invoice goes a step further: it is used once a deal is essentially agreed, often to confirm exact figures for customs, an import declaration, or an internal purchase approval before the goods ship or the work starts. A final invoice, sent after delivery, is the one that actually requests payment.

The separate number series is the detail that saves the most trouble later. An invoice series is meant to be unbroken, so a proforma that borrows the next invoice number either leaves a gap when the order falls through or tempts you to reuse the number on the real invoice. Here each document type counts on its own, and the proforma draft is stored apart from your invoice draft, so working on one never overwrites the other.

When a proforma invoice is used

The proforma exists for the moment when a buyer needs a firm, invoice-shaped document but no sale has been booked yet. Three situations account for most of them:

• Payment before the goods are released. HMRC describes exactly this use: pro-forma invoices offered to potential customers, where the offer may or may not be taken up and the goods or services are not supplied unless payment is received. The buyer pays against the proforma, the seller ships, and the real invoice follows.
• Customs and import paperwork. A shipment can reach the border before the commercial invoice exists. Customs rules in some countries accept a pro forma invoice in its place for a limited time; the United States example is set out below.
• Internal approval on the buyer's side. A finance department often needs a firm number on a supplier document to raise a purchase order, release a budget or schedule a payment run before the order can go ahead. A proforma gives them that number without either side booking a sale.

What a proforma is not for is billing work that has already been done. Once the goods or services have been supplied, the document the buyer needs is the invoice itself, with its own number from your invoice series and a due date rather than a validity date.

Proforma invoices for export and customs

Customs rules differ by country, and this page does not try to summarise them all. The United States regulation is used here as the worked example because it states both when a pro forma invoice is accepted and what it has to contain, in full and in public.

Under 19 CFR 141.91, an importer who cannot produce the required commercial invoice when the goods are entered may file a written declaration that it is not available, together with any invoices from the seller or shipper that do exist, and, if there are none, a pro forma invoice. A bond is given for producing the commercial invoice, which must then be produced within 120 days after the entry summary is filed. In other words, the proforma does not replace the commercial invoice; it holds its place.

The form in 19 CFR 141.85 shows what such a pro forma invoice is expected to carry:

• the names and addresses of the shipper, the seller, the consignee and the purchaser;
• whether the goods were purchased or agreed to be purchased, and what the stated prices are based on;
• for each item: marks and numbers, the quantity, a description, and the unit and total price;
• whether charges such as packing, inland freight and ocean freight are included in those prices;
• the country of origin;
• a signature with the signer's title, firm name and the date.

Most of that maps straight onto the generator above. Your business goes in From, the buyer or consignee in Bill to, with the purchaser added to the address lines when it is a different company. Each product gets its own line item with a quantity and a unit price, and the description is the place for marks and numbers. Freight belongs in the Shipping field under More details, or as its own line, so nobody has to guess whether it is in the unit prices. The country of origin, the delivery terms and the reason for the shipment go in the notes, and the PO number field takes the buyer's order reference. Print the PDF and sign it if the recipient needs a signature. Before you ship, confirm with your freight forwarder or the destination's customs authority which document they want and in what form.

What "This is not a tax invoice" means

Every proforma made here prints the line "This is not a tax invoice." directly under the title, in whichever of the seven document languages you choose. It is there for the person who books the document on the buyer's side: it says the paper is an offer, not a purchase invoice, and must not be entered as one.

In the UK the wording has a concrete consequence. HMRC's VAT guide says pro-forma invoices cannot be used as evidence to reclaim input tax, even when they show every detail a VAT invoice needs, and that they should be clearly marked "this is not a VAT invoice". Section 19.5.1 of the same guide adds that an invoice marked "pro-forma" or "this is not a tax invoice" cannot be used as evidence for reclaiming input tax. If you are VAT-registered in the UK and want HMRC's own words on the page, add "This is not a VAT invoice" to the notes as well.

The same section also says when the proforma stops being enough: once you actually supply the goods or services, or receive payment, you must issue a proper VAT invoice. That is what the Convert to invoice button is for. It opens the invoice generator with every line, party and note carried over, a number from your invoice series, fresh dates and a reference back to the proforma in the notes.

How to make a proforma invoice here

1. Fill in From and Bill to. If you have downloaded a document for this buyer before, their name is offered as you type, and picking it fills in their address, tax number and currency.
2. Check the number. Proformas start at PRO-001 and count on their own, so they never take a number from your invoice series.
3. Set the Valid until date. It defaults to 30 days after the issue date; shorten it if your prices or stock will not hold that long.
4. Add the line items with quantities and unit prices, or paste them from a spreadsheet with Paste rows. Put freight in the Shipping field and pick the currency your buyer pays in.
5. Use the notes for what happens next: when payment is due before dispatch, the delivery terms and, for an export, the country of origin.
6. Download the PDF. It is titled Proforma invoice, carries the notice under the title and is generated on your device; nothing is uploaded.
7. When the buyer confirms or pays, press Convert to invoice and send the real invoice.

Mistakes that cause trouble later

Giving the final invoice the same number as the proforma is the most common one, and it breaks the invoice series the moment an order falls through. Booking the proforma as a sale in your own accounts is the second: until the invoice is issued nothing has been sold. The third is leaving out a validity date, which turns a price for this month into an open offer. And for an export, a proforma that folds freight into the unit prices invites exactly the question customs and buyers ask first, so keep it on its own line.