What is Proforma Invoice?
A proforma invoice is a preliminary bill sent before goods are delivered or services are completed, showing the estimated costs and terms.
A proforma invoice (from Latin "for the sake of form") is a preliminary invoice sent to a buyer before a sale is finalized. Unlike a standard invoice, it's not a demand for payment but rather a good-faith estimate or quote showing what the final invoice will look like.
- **Key uses for proforma invoices:**
- Customs declarations: Required for international shipments to show the value of goods
- Pre-payment requests: Asking for deposits before starting work
- Budget approval: Helping clients get internal approval for purchases
- Import/export documentation: Required for letters of credit and international trade
Proforma vs Tax Invoice: A proforma invoice is NOT a valid tax document. You cannot use it to claim VAT or record as a sale. Once work is complete or goods are delivered, you must issue a proper tax invoice.
In the UK, proforma invoices are common in construction (for stage payments), international trade, and for large projects requiring deposits.
Examples
A builder sends a proforma for deposit before starting a renovation
An exporter provides a proforma for customs declaration
A supplier quotes costs before order confirmation
Related Terms
Invoice
An invoice is a commercial document issued by a seller to a buyer, listing the products or services provided and requesting payment.
Purchase Order
A purchase order (PO) is a commercial document issued by a buyer to a seller, authorizing a purchase and specifying the items, quantities, and agreed prices.
Credit Note
A credit note is a document issued by a seller to reduce the amount a buyer owes, typically for returned goods, overcharges, or discounts.
Put This Into Practice
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