What is a pro forma invoice and when do you use one?

Published Monday 30 March 2026

Table of contents

• What is a pro forma invoice?
• How is a pro forma invoice different from other invoices and quotes?
• When do you need a pro forma invoice?
• What should a pro forma invoice include?
• When to send a pro forma invoice
• How to create a pro forma invoice
• Manage your invoicing with confidence using Xero
• FAQs on pro forma invoices

Key takeaways

• Use pro forma invoices when customers need preliminary cost information for financing arrangements, customs clearance, or internal procurement processes, but never treat them as payment requests since they're not legally binding documents.
• Label your document clearly as "Pro forma invoice" at the top and include all standard invoice details except an official invoice number or due date, while adding a reference number for tracking purposes.
• Avoid recording pro forma invoices in your accounts receivable system since no money is owed yet, and always wait for customer confirmation before processing the final sale or shipping products.
• Send pro forma invoices after agreeing on terms but before finalising the sale, particularly for international transactions where buyers need to estimate import duties or arrange financing in advance.

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 and prices involved in a transaction but isn't a request for payment.

Unlike a standard invoice, a pro forma invoice has no invoice number or due date. You don't record it in your accounts receivable because no money is owed yet.

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

Pro forma invoices are often confused with other business documents. Here's how they differ:

• Pro forma invoice compared to sales invoice: A sales invoice is a formal request for payment sent after a transaction is final, with a due date and invoice number. A pro forma invoice is sent before the sale is complete and doesn't request payment.
• Pro forma invoice compared to commercial invoice: A commercial invoice is used in international trade (the backbone of the world economy, valued at USD 28 trillion) to finalise a sale, including tariff information and buyer/seller responsibilities. A pro forma invoice helps estimate customs duties before the sale but doesn't confirm the transaction is complete.
• Pro forma invoice compared to quote: Both documents outline prices for a potential transaction. However, quotes are typically used during negotiations, while pro forma invoices are usually sent after terms are agreed to support customs, financing, or procurement processes.

When do you need a pro forma invoice?

Businesses typically send pro forma invoices in three key situations:

• Financing arrangements: Pro forma invoices confirm the cost of an order so buyers can arrange finance before purchase.
• Customs clearance: Pro forma invoices state the value of imported goods for customs, and some countries require this detailed information before clearing shipments.
• Procurement processes: Some customers request pro forma invoices as part of their internal procurement because they're considered more definite than a quote.

What should a pro forma invoice include?

A pro forma invoice looks similar to a regular invoice but must be clearly labelled "Pro forma invoice" at the top. Here's what to include:

• Clear labelling: Mark the document as "Pro forma invoice" so it's not confused with a sales invoice.
• Buyer and seller details: Include names, addresses, and contact information for both parties.
• Product information: List items, descriptions, quantities, and prices.
• Terms of sale: Specify payment terms, delivery conditions, and any other relevant agreements. For international trade, this often involves using one of the eleven commonly used three-letter trade terms from the Incoterms rules.
• Reference number: Add a tracking number for easy retrieval (this isn't an official invoice number).
• Shipping details (if required): Some importers need weights, measures, and shipping costs included.

When to send a pro forma invoice

Send a pro forma invoice when a customer specifically requests one. This typically happens after you've agreed on terms but before the sale is finalised.

Customers often need pro forma invoices to:

• estimate import duties for customs
• satisfy internal procurement requirements
• arrange financing for the purchase

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

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

How to create a pro forma invoice

Creating a pro forma invoice is straightforward. Follow these steps:

1. Start with a standard invoice template and fill in all required fields.
2. Label the document clearly as "Pro forma invoice" at the top.
3. Add a reference number for tracking (not an official invoice number).
4. Include buyer and seller details, product information, prices, and terms.
5. Do not enter the invoice into your accounts receivable ledger.
6. If you use accounting software like Xero, check your provider's process for pro forma invoices to avoid accidentally recording it as a sale.

Avoid this common mistake: Don't send a regular sales invoice by accident. If your business uses accrual accounting, this will incorrectly record the transaction as income before the sale is confirmed.

Manage your invoicing with confidence using Xero

Pro forma invoices help with international trade, customer procurement, and financing arrangements. Getting them right helps you meet customer requirements and avoid accounting errors.

Xero cloud-based accounting software makes it easy to manage all your invoicing in one place. Create pro forma invoices without accidentally recording them as sales, then seamlessly issue final invoices when the transaction is complete.

Discover how Xero simplifies invoicing and financial management. 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?

No, a pro forma invoice isn't legally binding. It's a good-faith agreement created before you deliver products or services, not a formal contract or payment request.

Can a pro forma invoice be canceled?

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

Is it OK to pay a pro forma invoice?

No, you shouldn't pay a pro forma invoice. It's not a binding agreement, and the final price may change. Wait for 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 that both buyer and seller agree on products, prices, and terms before finalising the sale.
• Support customs clearance: Provide the detailed information importers need to estimate duties and clear shipments.
• Allow flexibility: Make changes to products, services, or costs without affecting your business accounts.

Can I use a pro forma invoice for customs clearance?

Yes, pro forma invoices are commonly used for customs purposes. They provide customs officials with preliminary information about the shipment's value, contents, and origin to help estimate duties and fees. However, you'll still need a commercial invoice for final customs clearance after the sale is complete.

How does a pro forma invoice help with financing?

Pro forma invoices help buyers secure financing by giving lenders a clear picture of the upcoming transaction's costs. This allows the buyer to arrange payment before the final invoice is issued, which is especially useful for large purchases or international transactions.