Proforma invoice: what it is, when and how to use it

Published Wednesday 22 April 2026

Table of contents

• What is a pro forma invoice?
• How is a pro forma invoice different from other invoices (and quotes)?
• Three common reasons for issuing a pro forma invoice
• What should a pro forma invoice look like?
• A pro forma invoice isn't a tax invoice
• When to send a pro forma invoice
• How to create a pro forma invoice
• Managing pro forma invoices with the right tools
• FAQs on pro forma invoices

Key takeaways

• Use a pro forma invoice after agreeing on terms with a buyer but before finalising the sale, so both parties can confirm pricing and details without creating a legal payment obligation.
• Label the document clearly as "Pro forma invoice" and keep it out of your accounts receivable ledger, since no sale has occurred and recording it could create tax and reporting problems.
• Recognise that a pro forma invoice is not a tax invoice, so buyers cannot use it to claim a GST credit — always follow up with an official tax invoice once the sale is confirmed.
• Include extra details such as product weights, shipping costs, and country of origin when sending a pro forma invoice for international shipments, as customs authorities need this information to clear goods.

What is a pro forma invoice?

A pro forma invoice is a preliminary document you send to buyers before completing a sale. It outlines products, services, and pricing without requesting payment.

For example, an Australian furniture maker might send a pro forma invoice to a New Zealand retailer before shipping chairs overseas. This lets the retailer arrange financing while the shipment clears customs.

Unlike regular invoices, pro forma invoices:

• no payment request: do not request payment or create legal payment obligations
• no invoice number: do not include an invoice number or due date
• no accounting entry: are not recorded in your accounting books as accounts receivable

A pro forma invoice confirms the price and details before you complete a sale.

How is a pro forma invoice different from other invoices (and quotes)?

Pro forma invoices serve a different purpose from other business documents, though they're often confused with similar paperwork. Here's how they compare:

Pro forma invoice vs commercial invoice

A commercial invoice is a sales invoice exchanged between importers and exporters. It includes details about buyer and seller responsibilities, plus any tariffs that apply to the shipment.

The key difference: a commercial invoice indicates a sale is final, while a pro forma invoice doesn't. Both documents help estimate customs duties and fees, but only the commercial invoice creates a binding transaction.

Pro forma invoice vs quote

Quotes and pro forma invoices both help you agree on prices. The difference is timing: you usually send a pro forma invoice after agreeing to the deal, to support tasks with customs, lenders, or procurement.

Three common reasons for issuing a pro forma invoice

Businesses typically issue pro forma invoices in three scenarios:

• financing approval: buyers need documentation to arrange financing before making large purchases
• customs clearance: international shipments require detailed pricing information to clear goods through customs
• procurement processes: corporate buyers need formal cost estimates to get internal procurement approval

What should a pro forma invoice look like?

A pro forma invoice gives detailed transaction information in a familiar invoice format, but makes it clear it's not a payment request.

Essential elements include:

• clear labelling: the words "Pro forma invoice" displayed prominently
• contact details: names, addresses, and contact information for buyer and seller (keep in mind that final tax invoices for sales over $1,000 must also show the buyer's identity or ABN)
• item descriptions: products or services listed with quantities and prices
• sale terms: payment conditions and terms of sale
• reference number: a tracking number (not an official invoice number)

For international shipments, also include:

• product weights and dimensions
• shipping costs and methods
• country of origin details

A pro forma invoice isn't a tax invoice

Pro forma invoices are not tax documents for GST purposes because you have not made a sale yet, and buyers must have an official tax invoice to claim a GST credit for purchases over A$82.50.

Important GST considerations:

• wait to record tax liability until you issue the final sales invoice
• include estimated GST amounts for planning, but ensure the final tax invoice shows the exact GST amount, rounded to the nearest cent
• record tax obligations only on actual sales invoices if you are GST-registered
• provide a tax invoice within 28 days if a customer requests one, unless the sale is for $82.50 (including GST) or less

When to send a pro forma invoice

Send pro forma invoices primarily when customers request them, typically after agreeing on terms but before finalising the sale.

Common timing scenarios:

• after quote acceptance: send once both parties agree to the terms
• international transactions: use when import or export shipments need customs documentation
• procurement processes: provide when corporate buyers require formal cost documentation

Before sending, confirm these points:

• sale status: the sale is not final at this stage
• approval required: get explicit approval before shipping products or processing payment
• final invoice timing: issue the final sales invoice only after receiving customer confirmation

How to create a pro forma invoice

Creating a pro forma invoice takes just a few adjustments to your standard invoice template. Follow these steps:

1. Complete your standard invoice template with all required fields
2. Label the document clearly as "Pro forma invoice" to prevent payment confusion
3. Exclude the document from your accounts receivable ledger since no sale has occurred
4. Check your accounting software for pro forma invoice features to prevent accidentally creating a sales invoice

Tip: Always issue a pro forma invoice first to prevent recording unearned income and creating tax and reporting issues.

Managing pro forma invoices with the right tools

The right tools help you track pro forma invoices, convert them to final sales invoices, and keep them separate from your official accounting records.

With Xero, you can:

• create a pro forma invoice directly from a quote
• send it to your customer for review
• convert it to a tax invoice when you're ready to bill

This saves you time, reduces errors, and keeps your records accurate. Get one month free.

FAQs on pro forma invoices

Here are answers to common questions about pro forma invoices.

Is a pro forma invoice legally binding?

A pro forma invoice is a preliminary document without legal binding force. You create it before delivering products or services, so it functions as a good-faith agreement rather than a formal contract.

Can a pro forma invoice be cancelled?

Yes, you can discard a pro forma invoice without any formal cancellation process. Since it's not a legal document or official accounting record, there's no need to edit or cancel it if the sale doesn't proceed.

Can you turn pro forma invoices into commercial invoices?

A pro forma invoice and commercial invoice serve different purposes and require separate creation. While both documents contain similar pricing information, a commercial invoice includes additional legal terms and regulatory details required for international trade.

How can a pro forma invoice help you?

A pro forma invoice helps you work with customers who need formal documentation before committing to a purchase. Importers, corporate procurement teams, and buyers arranging financing often require pro forma invoices to proceed with their internal processes.

Is it OK to pay a pro forma invoice?

Wait for the official sales invoice before making payment. A pro forma invoice is not a binding agreement and the price may still change.

What are the advantages of pro forma invoices?

The three main advantages of pro forma invoices are:

• align expectations: both buyer and seller confirm pricing and terms before the sale is final
• simplify customs: provide the documentation needed to clear international shipments
• allow flexibility: make changes to products, services, and costs without affecting your business accounts