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

Published Friday 20 March 2026

Table of contents

• What is a pro forma invoice?
• Three common reasons for issuing a pro forma invoice
• When to send a pro forma invoice
• What should a pro forma invoice include?
• How to create a pro forma invoice
• How is a pro forma invoice different from other invoices and quotes?
• A pro forma invoice isn't a tax invoice
• Simplify your invoicing with Xero
• FAQs on pro forma invoices

Key takeaways

• Send a pro forma invoice after your quote is accepted but before the sale is final to help customers secure financing, clear customs, or satisfy internal procurement requirements.
• Label the document clearly as "pro forma invoice" and include all standard invoice details like buyer information, product descriptions, and pricing, but don't record it in your accounts receivable since no sale has occurred yet.
• Recognize that a pro forma invoice creates no payment obligation and isn't legally binding, so customers should wait for the official sales invoice before making any payments.
• Use pro forma invoices strategically to align expectations with buyers and provide the detailed information importers need to estimate duties and clear shipments without affecting your accounting records.

What is a pro forma invoice?

A pro forma invoice is a preliminary document sent to a buyer before a sale is final. It outlines the products, quantities and prices that will be involved in the transaction.

Unlike a standard invoice, a pro forma invoice isn't a request for payment. It doesn't have an invoice number or due date, and you don't record it in your accounts receivable.

Three common reasons for issuing a pro forma invoice

Businesses typically issue pro forma invoices in three situations:

• Securing buyer financing: The invoice confirms order costs so buyers can arrange payment before committing.
• Clearing customs: Customs authorities require detailed value information to process imported goods, and providing this can be beneficial; for instance, some commercial importers can delay payment of duties and taxes for up to 10 business days after release if they have posted security.
• Satisfying procurement requirements: Some buyers need a pro forma invoice as part of their internal approval process because it's more definite than a quote.

When to send a pro forma invoice

Send a pro forma invoice after your quote is accepted but before the sale is final. Most businesses only create one when a customer specifically requests it.

Customers typically need pro forma invoices to:

• calculate import duties before committing to a purchase; for certain temporary imports, this involves calculating GST on 1/60th of the item's value for duty for each month it remains in Canada
• satisfy internal procurement or approval processes
• secure financing for the order

If your customer imports goods, ask whether they need a pro forma invoice before you finalize the deal.

The sale isn't complete at this stage. Get final confirmation from your customer before processing the order, shipping products, or issuing your sales invoice.

What should a pro forma invoice include?

Here's an example of what a pro forma invoice looks like:

A pro forma invoice looks like a standard invoice but must be clearly labelled "pro forma invoice." Include the following information:

• Buyer and seller details: names, addresses and contact information for both parties
• Product descriptions: itemized list of goods or services with quantities
• Pricing: unit prices, totals and any applicable discounts
• Terms of sale: payment terms, delivery conditions and validity period
• Reference number: a tracking number for easy retrieval (this isn't an official invoice number)

For international shipments, importers may also need:

• weights and dimensions of products
• shipping costs and method
• country of origin

How to create a pro forma invoice

Creating a pro forma invoice takes just a few steps. Here's how to do it without affecting your accounting records:

1. Start with a standard invoice template or your usual invoicing format
2. Label the document clearly as "pro forma invoice" at the top
3. Complete all required fields including buyer details, product descriptions and pricing
4. Add a reference number for tracking (not an official invoice number)
5. Save or send the document without entering it into your accounts receivable

Don't record this as a sale in your accounting software. If you use accrual accounting, entering it as a regular invoice will incorrectly show the amount as income before the sale is confirmed.

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

A pro forma invoice is often confused with similar documents. Here's how they differ:

• Sales invoice: Requests payment after a sale is final. It includes a due date and records money owed to your business. A pro forma invoice comes before the sale and creates no payment obligation.
• Commercial invoice: Used between importers and exporters to finalize international sales. It includes tariff information and buyer/seller responsibilities required for customs clearance. While a pro forma invoice helps estimate duties, a commercial invoice confirms the completed transaction.
• Quote: Establishes prices during negotiations before a deal is agreed. A pro forma invoice typically comes after the quote is accepted, providing the formal documentation buyers need for financing, customs or procurement.

A pro forma invoice isn't a tax invoice

A pro forma invoice is not a tax document. Because no sale has occurred yet, no GST is due and you have no tax liability. According to Canada's timing of liability rule, tax only becomes payable when payment is made or becomes due.

You can show the expected GST on a pro forma invoice to help buyers understand total costs. However, the actual tax obligation only begins when you issue the final sales invoice.

Simplify your invoicing with Xero

Pro forma invoices help you confirm deals, support your customers' procurement processes and simplify customs clearance. With the right tools, creating them doesn't have to add extra work.

Xero's invoicing features let you create professional documents, track when quotes convert to sales and keep your financial records organized. Get one month free and see how Xero simplifies invoicing for your business.

FAQs on pro forma invoices

Here are answers to common questions about creating and using pro forma invoices.

Is a pro forma invoice legally binding?

No, a pro forma invoice is not legally binding. It's a good-faith estimate, and the obligation to pay is not yet established. For tax purposes in Canada, payment is deemed to become due when a final invoice is issued or an agreement requires payment, not when a pro forma is sent.

Can a pro forma invoice be canceled?

Yes, you can simply discard a pro forma invoice if the sale doesn't proceed. Since it's not an official accounting document, there's no formal cancellation process required.

Can you turn pro forma invoices into commercial invoices?

No, you can't convert a pro forma invoice into a commercial invoice. While they share similar information, a commercial invoice requires additional legal details about shipping regulations, customs requirements and the responsibilities of all parties involved in the international transaction.

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, large organizations with procurement processes, and buyers seeking financing often require one before they can approve an order.

Is it OK to pay a pro forma invoice?

No, don't pay a pro forma invoice. It's not a binding agreement and the final price, quantities or terms may change. Wait until you receive an official sales invoice before making payment.

What are the advantages of pro forma invoices?

Pro forma invoices offer three key advantages:

• Align expectations: Confirm products, prices and terms with buyers before finalizing the sale.
• Simplify customs clearance: Provide the detailed information importers need to estimate duties and clear shipments.
• Allow flexibility: Make changes to quantities, pricing or specifications without affecting your accounting records.