Using proforma invoices

In this article, you’ll learn:

  • When to use a proforma invoice
  • How a proforma invoice is different from a quote
  • The easiest way to create a proforma invoice

Almost every business deals with invoices in one way or another. Whether it is creating and sending them yourself, or receiving invoices to be paid from suppliers. In any case, invoicing is an integral part of running a business. But what about proforma invoices?

The term ‘proforma invoice’ is probably one you’re familiar with, but there might be a bit of a grey area when it comes to being able to provide an example of a situation in which one would be used or what distinguishes it from a quote (or invoice, for that matter).

Unique to the business world, ‘proforma’ applies only to invoices that are not yet completed. This means that they do not have a unique, sequential invoice number (required on every legal invoice), and they are clearly labeled ‘Proforma’. Crucially, a proforma has no fiscal value, so it is not included in your accounting records.

So when is a proforma invoice issued?

Invoices are issued when a sale has been finalised and payment is due. However, if there are changes needed on the invoice, it can be a pain to issue a credit note to make the necessary corrections as no completed invoice should be sent.

An invoice has specific requirements but a proforma invoice is more versatile and can be edited

However, if the sale is not yet finalised and the products or service are still under discussion or negotiation, a proforma invoice can be used to provide an indication of the final invoice, but in a format that can then be adjusted and updated if necessary.

Used commonly in shipping, a proforma will also often include details regarding the shipping process, packaging, weight, and delivery fees. It is a useful document to have for customs, as a delivery note doesn’t always suffice.

A proforma invoice functions to provide both buyer and seller with a baseline for the sale, a breakdown of the items or services provided but without being a legally binding document.

Once revised, if changes are requested, the proforma invoice can easily be converted to a completed invoice by changing the title to ‘Invoice’ and adding an invoice number. The completed invoice can then be reissued.

Is there a difference between a proforma invoice and a quote?

There is not a big difference between the two documents. They are used in roughly the same manner for the same purpose as part of the invoicing process. Neither is a legal document, and both provide information about the sale.

Quotation or proforma invoice? There’s not much difference but there are a few small ways a proforma invoice is used differently

However, one arguable difference is that a quote is considerably more casual and it falls in the early stages of a sales process. A quote is not a document with any kind of expectation behind it - it can be accepted or rejected by a customer and like a proforma, it has no fiscal value. The sale can move forward or can be cancelled easily.

A quotation also does not necessarily include detailed information about the products or service, but rather provides an idea of the quantity and price.

A proforma invoice occurs before the products are delivered or the service is provided but is considered more binding than a quote, though not legally binding like a completed invoice. The customer still has room for negotiation before payment is made.

How should a proforma invoice look?

Most proforma invoices closely resemble completed invoices. While no specific requirement for the layout of a proforma invoice exists, keeping it close to what the finalised invoice will look like is a safe choice.

If you decide on the invoice layout, it’s easy to adapt an invoice template to suit the information for your proforma invoice. But just be sure that it’s properly labeled and contains no invoice numbers, as this will change a less formal document to a binding one.

Want to convert a proforma invoice to a completed invoice quickly and easily? Invoicing software makes it possible

Word and Excel offer invoice templates, but they’re often finicky and unreliable. Online invoicing software provides easy-to-use invoice templates that can be used to create and send a proforma invoice in less than 1 minute.

Once the negotiations are over, the proforma can be converted to a completed invoice with just a click. It’s a common phrase today and rarely literal, yet in the case of some invoice softwares, it takes literally one click to create a completed invoice. No tedious updating or double checking invoice numbers. It’s automatic and instant.


In summary

Proforma invoices are not always necessary but can be used as an integral part of your sales process. While similar to a quotation and an invoice, a proforma does serve a different purpose and can easily be created with the help of a template.

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