What is a Proforma Invoice? Definition & Best Practices
Defining the Proforma Invoice
A proforma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. It acts as a detailed quote or a declaration of intent, showing the types and quantities of goods, their value, and estimated shipping costs.
Proforma Invoice vs. Commercial Invoice: Key Differences
The major difference is legal and financial validity. A commercial invoice is a request for payment and is recorded as accounts receivable. A proforma invoice is not a request for payment, is not recorded in accounting ledgers, and cannot be used to pay taxes.
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Main Use Cases for Proforma Invoicing
Proforma invoices are heavily used in international trade and import/export. Customs authorities use proforma invoices to estimate customs duties and approve import permits before the goods cross borders. They are also sent to buyers who require advance documentation for internal purchase approvals.
Is a Proforma Invoice Legally Binding?
No, a proforma invoice is not legally binding. However, it establishes a clear understanding of the transactional values. If terms shift before shipment, the final commercial invoice will reflect the updated pricing.
Creating a Proforma Invoice Online
You can easily generate proforma invoices using our online platform. Label the document as "PROFORMA INVOICE" at the top, list your itemized values, and save the draft. Once the buyer confirms, you can update it to a standard commercial invoice.