What is a pro forma invoice?

Published Tuesday 9 June 2026

Table of contents

• What is a pro forma invoice?
• Why use a pro forma invoice?
• How pro forma invoices work
• Pro forma invoice template and example
• Pro forma invoice vs. other invoice types
• When to send a pro forma invoice
• How to create a pro forma invoice
• Invoice automation and software tools
• Simplify invoicing with Xero
• FAQs on pro forma invoices

Key takeaways

• A pro forma invoice is a preliminary estimate, not a payment request. It outlines expected costs, quantities, and terms before a sale is finalized.
• Pro forma invoices support customs, financing, and procurement. They help buyers arrange funding, clear international shipments, and satisfy internal purchasing processes.
• They differ from standard invoices in legal and accounting status. A pro forma invoice doesn't carry an invoice number, due date, or accounts receivable entry.
• Converting a pro forma into a final invoice is straightforward. Once the buyer confirms the order, you can issue a formal sales invoice with updated details.

What is a pro forma invoice?

A pro forma invoice is a preliminary document sent to a buyer before a sale is finalized, outlining the expected products, quantities, and prices of a potential transaction. The pro forma invoice definition centers on its purpose: it serves as a good-faith estimate rather than a demand for payment.

Unlike a standard invoice, a pro forma invoice doesn't include an invoice number or due date. It isn't recorded as accounts receivable in your books. Think of it as a detailed preview of what the final invoice will look like once both parties agree on terms.

The meaning and use of a pro forma invoice extend beyond simple price quotes. In international trade, it can accompany shipments through customs. In domestic business, it helps buyers plan budgets, arrange financing, or get internal approval before committing to a purchase. You may also hear pro forma invoices referenced alongside pro forma financial statements, though the two serve different purposes.

Why use a pro forma invoice?

The purpose of a pro forma invoice is to give both buyer and seller a clear, documented understanding of a transaction before it's finalized. It builds trust and reduces the chance of disputes later on.

Here are the most common reasons to use one:

• Confirm order costs. A pro forma invoice helps buyers see the full breakdown of prices, taxes, and shipping charges upfront. This makes it easier to arrange financing or get budget approval.
• Support customs clearance. For international shipments, customs authorities often require a pro forma invoice to assess the declared value of imported goods. It helps determine duties and excise taxes before the goods arrive.
• Satisfy procurement requirements. Many organizations have internal purchasing processes that require a written cost estimate before approving an order. A pro forma invoice meets that need.
• Set expectations on both sides. By listing products, quantities, and terms of sale in writing, you reduce misunderstandings and give the buyer confidence in what they're agreeing to.

How pro forma invoices work

A pro forma invoice follows a clear sequence from initial discussion to final billing. Here's how the process typically works in five steps.

1. Negotiate terms. You and the buyer discuss the products or services, quantities, pricing, delivery timelines, and any special conditions. This conversation sets the foundation for the pro forma invoice.
2. Send the pro forma invoice. Once you've agreed on preliminary terms, you create and send the pro forma invoice. It should include all the details the buyer needs to review the proposed transaction.
3. Receive confirmation. The buyer reviews the pro forma invoice and either accepts it, requests changes, or uses it to secure financing or internal approval. This step may involve some back-and-forth negotiation.
4. Complete the transaction. After the buyer confirms the order, you deliver the goods or services as outlined. The pro forma invoice serves as the reference point for what was agreed upon.
5. Issue the final invoice. With the transaction complete, you send a formal sales invoice that includes an invoice number, payment terms, and a due date. This is the document you record in your accounting system.

Pro forma invoice template and example

A well-structured pro forma invoice includes all the details a buyer needs to evaluate and approve a potential order. You can start with a standard invoice template and adapt it for pro forma use.

Every pro forma invoice should include these key elements:

• Seller details: your business name, address, and contact information
• Buyer details: the recipient's business name, address, and contact information
• Reference number: a unique identifier for tracking (not a formal invoice number)
• Product or service descriptions: itemized list with quantities, unit prices, and totals
• Pricing summary: subtotal, applicable taxes, shipping costs, and grand total
• Terms of sale: delivery timeline, payment terms, and any conditions or disclaimers
• "Pro forma invoice" label: clearly marked so it isn't confused with a standard invoice

Example 1: domestic B2B order

A wholesale supplier sends a pro forma invoice to a retail shop ordering 200 units of a product. The document lists per-unit pricing, bulk discount, estimated sales tax, and a 30-day delivery window. The retailer uses it to get budget sign-off from their finance team before confirming the order.

Example 2: international shipment with customs

An exporter sends a pro forma invoice to an overseas buyer for a container of goods. The document includes a detailed product description, Harmonized System (HS) codes, declared value, Incoterms, and estimated freight charges. Customs authorities use this to calculate duties before the shipment clears the border.

Example 3: freelancer project estimate

A freelance designer sends a pro forma invoice to a client outlining the scope of a branding project. It breaks down deliverables (logo design, brand guidelines, social media templates), hourly rates, and an estimated total. The client reviews and approves it before work begins. For more tips on billing as a freelancer, see Xero's freelance invoice guide.

Sending a pro forma invoice by email

When emailing a pro forma invoice, keep your message brief and professional. A simple approach works well:

"Hi [Name], please find attached the pro forma invoice for [project or order description]. This outlines the estimated costs, quantities, and terms for your review. Let me know if you have any questions or would like to adjust anything before we proceed."

Pro forma invoice vs. other invoice types

Several document types look similar to a pro forma invoice but serve different purposes. Here's how a pro forma invoice compares to the most common alternatives.

Sales invoice

• Purpose: requests payment for goods or services already delivered.
• Legal status: a legally recognized financial document recorded in your books.
• Payment requirement: yes, the buyer is expected to pay by the due date.
• Typical use case: issued after completing a sale to collect payment and record revenue.

Commercial invoice

• Purpose: serves as the official customs document for international trade.
• Legal status: a legally binding record used to calculate tariffs and duties.
• Payment requirement: yes, it represents the actual transaction value.
• Typical use case: accompanies shipped goods across borders for customs clearance.

Quote

• Purpose: provides a price estimate for products or services before any commitment.
• Legal status: not legally binding unless accepted and converted to a contract.
• Payment requirement: no, it's an estimate only.
• Typical use case: sent early in the sales process so the buyer can compare options. You can send quotes directly from your accounting software.

Purchase order

• Purpose: a buyer's formal authorization to purchase goods or services from a seller.
• Legal status: becomes a binding contract once the seller accepts it.
• Payment requirement: not directly; it authorizes the transaction, and payment follows the invoice.
• Typical use case: used by organizations with structured procurement processes to approve spending.

Credit note

• Purpose: reduces the amount owed on a previously issued invoice.
• Legal status: a formal accounting document that adjusts the original transaction.
• Payment requirement: no; it represents a credit or refund to the buyer.
• Typical use case: issued when goods are returned, a pricing error is corrected, or a discount is applied after invoicing.

Debit note

• Purpose: requests an increase to the amount a buyer owes.
• Legal status: a formal document that supplements the original invoice.
• Payment requirement: yes, it adds to the balance due.
• Typical use case: issued when additional charges arise after the original invoice, such as extra services or corrected quantities.

Receipt

• Purpose: confirms that payment has been received.
• Legal status: serves as proof of payment for the buyer's records.
• Payment requirement: no; it acknowledges payment already made.
• Typical use case: provided after the buyer pays an invoice, useful for expense tracking and tax documentation.

When to send a pro forma invoice

You should send a pro forma invoice whenever a buyer needs a documented cost estimate before committing to a purchase. It's a practical step that builds clarity and trust in the transaction.

The most common situations include:

• Arranging financing. If your buyer needs to secure a loan or line of credit to fund the purchase, a pro forma invoice gives their lender a clear picture of the expected costs.
• Clearing customs. International shipments often require a pro forma invoice so customs authorities can assess the value of goods before they arrive at the border.
• Complying with procurement rules. Many companies require a written estimate before approving internal purchase orders. A pro forma invoice satisfies that requirement.
• Introducing new products or services. When you're offering something new, a pro forma invoice lets the buyer review the details before making a decision.

For more guidance on timing and delivery, see this guide on how to send an invoice.

How to create a pro forma invoice

Creating a pro forma invoice is straightforward. Follow these five steps to produce a clear, professional document your buyer can act on.

1. Start with a standard invoice template. Use your existing invoice template as a starting point. This keeps formatting consistent and saves time.
2. Label it clearly. Add the words "Pro Forma Invoice" at the top of the document. This prevents any confusion with a formal sales invoice.
3. Complete all required fields. Fill in your business details, the buyer's details, itemized product or service descriptions, quantities, prices, taxes, and terms of sale.
4. Add a reference number. Assign a unique reference number for tracking purposes. Don't use your standard invoice numbering sequence, since a pro forma invoice isn't a formal financial record.
5. Keep it out of your accounts. A pro forma invoice shouldn't appear in your accounting system as revenue or accounts receivable. It's an estimate, not a completed transaction.

Invoice automation and software tools

Invoicing software can simplify the entire process from pro forma estimate to final payment. Automation reduces manual data entry, cuts down on errors, and helps you get paid faster.

Here are key features to look for in invoicing tools:

• Pro forma to final invoice conversion. The ability to convert a pro forma invoice into a formal sales invoice with a few clicks saves time and keeps your records consistent.
• Recurring invoices. If you send similar invoices regularly, automation lets you schedule them in advance so you don't have to recreate each one manually.
• Payment tracking. Real-time visibility into which invoices are paid, overdue, or pending helps you manage cash flow without chasing down information.
• Automatic reminders. Automated payment reminders go out on schedule, so you spend less time following up with buyers.
• Multi-currency support. If you work with international clients, the ability to invoice in their local currency simplifies the process for both sides.

Cloud-based tools also give you access to your invoicing data from anywhere, which is helpful if you manage your business on the go. You can explore Xero's online invoicing features to see how automation works in practice.

Simplify invoicing with Xero

Managing invoices doesn't have to be time-consuming. Xero's invoicing tools help you create, send, and track invoices in one place, so you can focus on running your business instead of chasing paperwork.

Whether you're sending a pro forma invoice to a new client or converting it into a final sales invoice, Xero keeps the process organized and efficient. With built-in payment tracking, automatic reminders, and multi-currency support, you can stay on top of your cash flow with less effort. For answers to common invoicing questions, visit the invoicing questions guide. Ready to get started? Get one month free.

FAQs on pro forma invoices

Here are some frequently asked questions about pro forma invoices.

Is a pro forma invoice legally binding?

No, a pro forma invoice isn't legally binding. It's an estimate of costs and terms, not a formal contract or demand for payment. Once both parties agree and a final sales invoice is issued, that document carries legal weight.

Can a pro forma invoice be canceled?

Yes. Because a pro forma invoice isn't a binding financial document, either party can cancel or revise it at any time before the transaction is finalized. Simply communicate the change to the other party in writing.

Can you convert a pro forma invoice into a commercial invoice?

Yes, you can. Once the sale is confirmed, you replace the pro forma invoice with a commercial invoice that reflects the final agreed terms. The commercial invoice includes a formal invoice number and serves as the official record for customs and accounting purposes.

Should you pay a pro forma invoice?

No. A pro forma invoice isn't a request for payment. It's a preliminary estimate. Payment is only due once the seller issues a formal sales invoice after the transaction is completed.

What are the advantages of pro forma invoices?

Pro forma invoices give both parties a clear understanding of costs before committing. They help buyers secure financing, plan budgets, and get internal approvals. For sellers, they reduce order disputes and set clear expectations upfront.

How does a pro forma invoice help with customs and international shipping?

Customs authorities use pro forma invoices to assess the declared value of goods entering a country. This helps determine applicable duties and taxes before the shipment arrives. Including product descriptions, HS codes, and Incoterms on the document speeds up the clearance process.