What is a proforma invoice, and how to prepare one?

When a customer says "send us a quote or pre-invoice first, we'll get approval and come back to you," what they usually need is a proforma invoice. A proforma is a preliminary, offer-style document prepared for a sale that has not happened yet; it states the price, quantity, delivery terms and payment terms. Despite the name, it is not an official invoice: it creates no accounting entry, triggers no VAT or income tax, and does not by itself demand payment. Even so, it is one of the most widely used documents in trade — because it gets both parties on the same page before the sale, builds trust, and puts the negotiation on a written footing. This guide explains what a proforma invoice is, how it differs from a real invoice, what it should contain, and how to prepare one step by step.

What exactly is a proforma invoice?

The name comes from the Latin "pro forma," meaning "as a matter of form": a document that looks like an invoice but carries no financial obligation. The seller states, in writing, at what price, in what quantity and under what delivery and payment terms a product or service will be offered. The buyer reviews it; if the terms suit them, they confirm the order, pay a deposit if required, or start an internal approval process. Once approved, the sale takes place and the seller issues the real invoice. In short, a proforma is a promise; the real invoice is proof the promise was kept.

Using a proforma is entirely legal but not legally required. The critical point: a proforma never replaces the official invoice. After the goods or service are delivered, a real invoice (electronic or paper) must be issued within the period your local rules require.

Proforma invoice vs. real invoice

Confusing the two is common but has real consequences, so the differences are worth stating clearly. Purpose: a proforma offers terms before the sale; a real invoice creates a financial record after it. Legal validity: a proforma is not an official document and is not recorded in the books; a real invoice is legally binding and creates a debtor-creditor relationship. Tax: a proforma triggers no VAT; a real invoice calculates and reports VAT. Timing: a proforma is issued before the order is confirmed; the real invoice after delivery. In one line: a proforma informs and offers; an invoice proves the sale happened.

What a proforma invoice should contain

A well-made proforma includes everything the buyer needs to decide, clearly and completely. At the very top, write "PROFORMA INVOICE" in bold to make clear it is not an official invoice. Then add the seller's details (name, address, contact, tax number if needed), the buyer's details, the issue date and a validity period — stating validity clarifies how long the prices are binding and prevents misunderstandings. The body lists the product/service line items, each with a description, quantity, unit price, VAT rate if applicable, and total. Finally, add payment terms, delivery terms and — for exports — Incoterms and bank details.

When is a proforma invoice used?

A proforma is especially useful in a few situations. In import and export, the buyer needs it to start customs procedures, open a letter of credit, or clarify terms before ordering; in international trade it is almost a daily document. In large or project-based deals, the customer asks for a detailed pre-offer to secure budget approval or speed up procurement. In deals requiring a deposit, the customer reviews the proforma, accepts the terms, pays the deposit and work begins. It is also frequently requested in public tenders and corporate approval flows for budgeting. What all these share is the need to reach a written agreement before the sale is final.

How to prepare a proforma invoice

In practice you can prepare a proforma with a Word/Excel template, but that approach invites line-item errors and scattered tracking. A healthier path is to use the proforma/quote module of a pre-accounting or quoting tool: enter the items, prices and VAT once, generate a professional-looking PDF, and send it to the customer. The biggest advantage comes after approval. When the customer says "yes," instead of re-typing the same items from scratch, you convert the proforma into a real invoice in one click — saving time and eliminating copy errors. It is a natural bridge from the quote stage to the sale.

Treating the proforma as part of your sales process, rather than an isolated document, changes everything. Managing the quote → approval → order → invoice → collection chain in one place shows clearly which quote is waiting, which turned into an invoice, and which payment is overdue. Our deeper piece on quote management helps you strengthen the first link of that chain.

Frequently asked questions

Does a proforma need a stamp or signature? No; a stamp or signature does not turn it into an official invoice. However, a customer stamping and approving the proforma is often used as a commercial confirmation meaning "I accept the terms." When is the real invoice issued after a proforma? When the sale happens or the order is confirmed; after delivery, a real invoice must be issued within the period your rules require. Is there an "e-archive proforma" type? No; a proforma is not an official electronic document type. You prepare it electronically as a PDF and, once approved, convert the same information into an e-invoice.