Proforma invoice: what it is, uses, template + example

Published Monday 2 March 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
• Simplify invoicing with Xero
• FAQs on pro forma invoices

Key takeaways

• Use pro forma invoices to help buyers arrange financing, clear customs, or meet procurement requirements before finalizing a sale, but remember they're not legally binding and don't request payment.
• Label your document clearly as "Pro Forma Invoice" at the top and include all standard invoice elements except an official invoice number, due date, or accounts receivable entry.
• Send a pro forma invoice after agreeing on initial terms but before completing the transaction, then wait for customer confirmation before shipping goods or issuing the final sales invoice.
• Create a separate commercial invoice for international shipments rather than converting your pro forma invoice, as commercial invoices require additional legal terms and regulatory details for customs clearance.

What is a pro forma invoice?

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

Unlike a standard invoice, a pro forma invoice isn't a request for payment. It doesn't include an invoice number or due date, and it's not recorded as accounts receivable in your books.

Formal accounting standards reserve that category for confirmed obligations and require detailed disclosures for items like past due financing receivables.

Why use a pro forma invoice?

Pro forma invoices serve several important purposes for small businesses. Here are the most common reasons to use one:

• Confirm order costs: Helps buyers arrange financing by providing a detailed cost breakdown before the sale is final
• Support customs clearance: States the value of imported goods so shipments can clear customs in countries that require detailed documentation
• Satisfy procurement requirements: Meets internal purchasing processes that require more formal documentation than a standard quote. For example, some government contracts involve specific tax rules. The 2 percent excise tax applies to certain federal procurement payments made to foreign entities.

How pro forma invoices work

A pro forma invoice helps the buyer and seller agree on terms before any goods or services change hands. Here's how the process typically flows:

1. Negotiate terms: You and your customer agree on products, quantities, and pricing.
2. Send the pro forma invoice: Provide a detailed breakdown of costs so the buyer can review, arrange financing, or satisfy procurement requirements.
3. Receive confirmation: The buyer approves the pro forma invoice, signaling they're ready to proceed.
4. Complete the transaction: Deliver the goods or services as agreed.
5. Issue the final invoice: Send an official sales invoice (or commercial invoice for international shipments) requesting payment.

The pro forma invoice isn't binding. Either party can still negotiate changes before the final invoice is issued.

Pro forma invoice template and example

A pro forma invoice looks similar to a standard invoice but must be clearly labeled "Pro Forma Invoice" at the top. Include these key elements:

• Seller details: Your business name, address, and contact information
• Buyer details: Customer's name, address, and contact information
• Reference number: A tracking number (not an official invoice number) for easy retrieval
• Product descriptions: Itemized list of goods or services with quantities
• Pricing: Unit prices, totals, and any applicable taxes or fees
• Terms of sale: Payment terms, delivery conditions, and validity period

For international shipments, importers may also require weights, measurements, and shipping costs to estimate customs duties.

Pro forma invoice vs. other invoice types

A pro forma invoice serves a different purpose than other common business documents. Here's how they compare:

• Sales invoice: A sales invoice is sent after a transaction is complete to request payment. It includes an invoice number, due date, and is recorded as accounts receivable. A pro forma invoice is sent before the sale and isn't a payment request.
• Commercial invoice: A commercial invoice is used in international trade as the official customs document. It includes tariff codes, buyer and seller responsibilities, and signifies a final sale. A pro forma invoice helps estimate duties but doesn't finalize the transaction.
• Quote: Provides pricing during negotiations before terms are agreed. A pro forma invoice typically comes after you've agreed on initial terms to support financing, customs, or procurement processes.

When to send a pro forma invoice

Send a pro forma invoice when a customer requests one, typically after you've agreed on terms but before finalizing the sale. Common scenarios include:

• Arranging financing: The buyer needs documentation to secure funding for the purchase
• Customs clearance: Importers require detailed cost information to estimate duties and clear shipments
• Complying with procurement rules: The buyer's organization requires formal documentation before approving purchases

If your customer is an importer, ask whether they need a pro forma invoice before shipping.

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

How to create a pro forma invoice

Follow this process to create a pro forma invoice:

1. Start with a standard invoice template: Use your standard invoice format as a starting point
2. Label it clearly: Add "Pro Forma Invoice" at the top so your customer knows it's not a payment request
3. Complete all required fields: Include buyer and seller details, itemized products, pricing, and terms
4. Add a reference number: Use a tracking number (not an official invoice number) for easy retrieval
5. Keep it out of your accounts: Don't record the pro forma invoice as accounts receivable since the sale isn't confirmed

If you're using accounting software, check how to send a pro forma invoice without triggering a sales record. Make sure to issue a pro forma invoice (not a standard invoice) to avoid recording income prematurely if you use accrual accounting.

Under U.S. GAAP, you recognize revenue when a contract begins and when you expect payment. There are simpler rules for contracts where payment occurs one year or less from transferring goods.

Simplify invoicing with Xero

Pro forma invoices help you confirm pricing, clear customs, and satisfy what procurement teams require before finalizing a sale. Getting them right keeps your business running smoothly.

Xero makes invoicing straightforward. Create professional invoices, track payments, and manage your cash flow from one place. With customizable templates and automated reminders, you can focus more time on running your business.

Ready to streamline your invoicing? Get one month free and see how Xero can help.

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 because it comes before you and the buyer agree on final terms. In federal procurement, the legal definition of a "contract" is very specific. A pro forma invoice is a preliminary document, not the contract itself.

Can a pro forma invoice be canceled?

Yes, you can cancel or discard a pro forma invoice at any time. Since it's not a legal document or official accounting record, you don't need to follow a formal process to cancel it.

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

You'll need to create a separate commercial invoice rather than converting a pro forma invoice directly. While both documents contain similar pricing information, a commercial invoice includes additional legal terms, tariff codes, and regulatory details required to clear customs.

For instance, in certain U.S. federal procurement deals with foreign entities, the acquiring agency must prepare a Form 1042-S for tax withholding. This regulatory detail would be part of the final commercial documentation.

Should I pay a pro forma invoice?

Wait for the official sales invoice before making payment. The final price or terms may still change.

What are the advantages of pro forma invoices?

Pro forma invoices offer several benefits:

• confirm pricing and terms before committing to a sale
• help buyers arrange financing or satisfy procurement requirements
• provide documentation to clear customs on international shipments
• allow flexibility to negotiate changes before the final invoice

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

A pro forma invoice helps importers estimate customs duties and taxes before goods arrive. It provides the product descriptions, quantities, values, and shipping details that customs officials need to assess shipments. Some countries require a pro forma invoice before clearing goods through customs.