What a proforma invoice actually is
A proforma invoice (from the Latin pro forma, „as a matter of form“) is a preliminary document that sets out the expected cost of goods or services before they are supplied. Think of it as a detailed, good-faith estimate dressed up to look like an invoice: it lists the items, quantities, prices and any tax, so the buyer knows exactly what they are agreeing to pay.
Crucially, a proforma invoice is not a legal demand for payment. It does not create a receivable in your accounts, it cannot be used by the buyer to reclaim VAT or input tax, and it should never be entered into your bookkeeping as a sale. It is a quote in invoice clothing - a commitment to your prices and terms, issued before the deal is finalised. Once the goods ship or the service is delivered, you replace it with a proper tax invoice.
Proforma invoice vs commercial (final) invoice
The two documents can look almost identical, which is why they are so often confused. The difference is purely about status and timing. A proforma is issued before the transaction is complete and has no accounting or tax weight. A commercial (final) invoice is issued after the supply, carries a unique sequential number, demands payment, and is the document both parties record for tax and VAT purposes.
A simple test: if the document can be used to claim back VAT, deducted as a business expense, or chased as a debt, it is a real invoice - not a proforma. A proforma can do none of those things.
- Purpose
- Proforma: an estimate or commitment before the sale. Final invoice: a binding demand for payment after the supply.
- Tax and VAT
- Proforma cannot be used to charge or reclaim VAT. A final invoice is the only valid document for VAT and tax records.
- Numbering
- A proforma must NOT carry a sequential tax-invoice number. A final invoice must have a unique, sequential number.
- Accounting
- A proforma is never booked as revenue. A final invoice is recorded in your sales ledger.
- Amounts
- Proforma amounts are estimated and can still change. Final invoice amounts are fixed and due.
When to use a proforma invoice
A proforma invoice is the right tool whenever you need to put numbers in front of a buyer before the sale is locked in. Common situations include:
Sending a formal quote a client can approve as-is; agreeing the price and scope of work in advance; requesting prepayment or a deposit before you start; and supporting customs and import declarations, where carriers and authorities need a stated (estimated) value for the goods before a commercial invoice exists. It is also useful for internal purchase approvals, where a buyer’s finance team needs a costed document to raise a purchase order.
What to put on a proforma invoice
A proforma should give the buyer everything they need to make a decision, while making it unmistakable that the document is not a final tax invoice. Label it clearly, leave off the sequential tax-invoice number, and show the figures as estimates with a date by which the offer holds.
- The words „Proforma invoice“
- Label the document clearly so it is never mistaken for a tax invoice.
- No sequential tax-invoice number
- Use a separate reference if you wish, but never a number from your real invoice series.
- Your details and the buyer’s details
- Full name, address and contact for both you (the seller) and the buyer.
- Description, quantity and unit price
- A clear line for each item or service, so the buyer sees exactly what is being quoted.
- Estimated amounts and any tax
- The estimated subtotal, any VAT or tax shown for information, and the estimated total.
- A validity date
- How long the quoted prices and terms remain valid (for example, valid for 30 days).
- Payment and delivery terms
- Proposed payment method, deposit terms and expected delivery or completion, where relevant.
How a proforma becomes a real invoice
A proforma is a stepping stone. Once the buyer accepts it and the goods are shipped or the service is delivered, you issue the final commercial invoice that replaces it. That final invoice carries the next number in your sequential series, confirms the actual amounts (which may differ slightly from the estimate), and becomes the document both sides use for payment, VAT and accounts.
In practice you keep the same line items and simply convert: relabel the document as an invoice, add the sequential number and issue date, finalise the figures, and send it as the binding request for payment. With a generator like FreeBillGen you build the proforma first, then produce the matching final invoice from the same details in a couple of clicks - no re-typing, no mismatched numbers.
Proforma invoice questions
Is a proforma invoice a real invoice?
No. A proforma invoice is a preliminary, estimated document issued before the sale is complete. It is not a legal demand for payment, cannot be used to reclaim VAT, and should not be recorded in your accounts. The real, final invoice is issued after the goods or services are delivered.
Can I claim VAT back on a proforma invoice?
No. A proforma invoice is not a valid VAT document, so neither you nor your buyer can use it to charge or reclaim VAT. Only the final commercial invoice, which carries a sequential number and is issued after the supply, is valid for VAT purposes.
Does a proforma invoice need an invoice number?
It must not use a number from your sequential tax-invoice series, because that series is reserved for real invoices. You can give a proforma its own separate reference (for example, PRO-001) so you can track it, but the official sequential number is only assigned when you issue the final invoice.
What is the difference between a quote and a proforma invoice?
They serve the same purpose - showing a price before the sale - but a proforma is formatted like an invoice, with itemised lines, tax shown for information, and totals. A quote is usually less formal. Many businesses prefer a proforma because it gives the buyer a document that mirrors the final invoice they will receive.
Do I have to pay a proforma invoice?
Not as a legal obligation. A proforma is a request to confirm a price or arrange prepayment, not an enforceable demand for payment. Many sellers do ask for a deposit or full prepayment against a proforma before starting work, but the binding payment obligation only arises with the final invoice.
When should I use a proforma invoice for customs?
Use one when goods are crossing a border before a commercial invoice exists - for example, samples, replacements, or goods sent for approval. Customs and carriers need a stated, estimated value to assess duties, and a clearly labelled proforma provides that. The final commercial invoice follows once the sale is confirmed.