What Is a Proforma Invoice?
A proforma invoice is a preliminary bill of sale sent to a buyer before goods are shipped or services are delivered. It outlines the products, prices, quantities, and terms of a proposed transaction — essentially a formal commitment to sell at the stated price, valid for a specified period.
Unlike a commercial invoice, a proforma invoice is not a demand for payment. It's closer to a detailed quote. Buyers use it to arrange financing, apply for import licenses, or simply review and approve an order before it's confirmed.
In international trade, proforma invoices play a critical role. Banks require them to open letters of credit. Customs authorities in many countries accept them for pre-clearance or import permit applications. And buyers in regulated markets often can't release foreign currency without one.
How to Create a Proforma Invoice (Step by Step)
Creating a proforma invoice is straightforward — if you've ever filled out a regular invoice, you already know most of the process. Here's how to do it with this tool:
- Enter your document details. Start with the invoice number, issue date, and validity period. These tell the buyer how long the quoted prices are guaranteed.
- Add seller and buyer information. Include full company names, addresses, tax IDs, and contact details for both parties. For EU transactions, add EORI numbers.
- Specify shipping details. Choose the applicable Incoterm (FOB, CIF, EXW, etc.), shipping method, ports of loading and discharge, and country of origin. These fields are essential for customs.
- List your items. Add each product with a clear description, quantity, unit, and unit price. Include HS codes for international shipments — customs officers use these to determine duty rates.
- Review the financial summary. The tool automatically calculates subtotals, discounts, taxes, shipping costs, and the grand total. Select your currency from 40+ options.
- Set payment terms and download. Choose from standard payment terms (Net 30, Letter of Credit, etc.), add bank details, and download your PDF.
When Do You Need a Proforma Invoice?
Before closing a deal. When a buyer asks for a formal quote before committing to an order, a proforma invoice provides all the details they need to make a decision — prices, quantities, delivery terms, and validity period.
For letters of credit. Banks issuing letters of credit typically require a proforma invoice as supporting documentation. It shows the bank exactly what the buyer is importing and at what cost.
For customs pre-clearance. Many countries allow importers to submit a proforma invoice to customs before the goods arrive. This speeds up clearance and helps the buyer prepare for duties and taxes in advance.
For import licenses and foreign exchange. In countries with foreign exchange controls, buyers often need a proforma invoice to apply for permission to convert local currency and pay the seller. No proforma, no approval.
Proforma Invoice vs. Other Documents
People often confuse proforma invoices with other business documents. Here's how they compare:
Proforma Invoice vs. Commercial Invoice
A proforma is a quote; a commercial invoice is the real bill. The proforma comes first, the commercial invoice follows once the goods ship. Customs uses the commercial version for duty calculations.
Proforma Invoice vs. Quotation
A quotationis less formal — it's a price proposal. A proforma invoice looks like an invoice and carries more weight with banks, customs, and government agencies. Use a quote for domestic deals, a proforma for international or regulated transactions.
Proforma Invoice vs. Purchase Order
A purchase orderis issued by the buyer to confirm an order. A proforma invoice is issued by the seller to propose terms. They're two sides of the same conversation — the proforma says "here's what I'll sell you," and the PO says "yes, I'm buying it."
Proforma Invoice vs. Standard Invoice
A standard invoice is a request for payment after delivery. A proforma invoice is sent before delivery as a price confirmation. Use a standard invoice for billing; use a proforma for quoting international deals.
Frequently Asked Questions
What is a proforma invoice?
A proforma invoice is a preliminary document sent before a sale is finalized. It outlines the goods or services, their estimated cost, and the terms of the deal. Think of it as a formal quote — it tells the buyer exactly what they'll be paying for, but it's not a demand for payment yet.
Is a proforma invoice legally binding?
No. A proforma invoice is an estimate, not a binding contract. It becomes binding only when both parties agree to the terms and the seller issues a commercial invoice. However, banks and customs may use it as supporting documentation for letters of credit or import permits.
What's the difference between a proforma invoice and a commercial invoice?
A proforma invoice is sent before the goods ship — it's a quote. A commercial invoice is issued at or after shipment and is legally binding. Customs uses the commercial invoice to calculate duties, not the proforma. Once the deal is confirmed, the proforma is typically replaced by a commercial invoice with final pricing.
When do I need a proforma invoice?
You'll need one when a buyer requests a formal quote before placing an order, when importing goods and you need documentation for customs pre-clearance, when applying for a letter of credit from a bank, or when your buyer needs to arrange foreign currency or import licenses before the shipment.
Can I use this tool for free without signing up?
Yes. Everything runs in your browser. There's no account to create, no email to verify, and no limit on how many proforma invoices you can generate or download.
What should I include on a proforma invoice?
At minimum: seller and buyer details, a description of the goods, quantities, unit prices, total value, currency, payment terms, delivery terms (Incoterms), and a validity period. For international trade, adding HS codes, country of origin, and shipping details helps avoid customs delays later.