What is a proforma invoice and how to make one

A proforma invoice is a preliminary bill of sale that you send to your client before the work has been completed.

You would make this invoice as a commitment to goods or services that are yet to be delivered.

It should list the work to be completed under the arrangement with your client as well as the quantity of work and the price.

A proforma invoice is neither an invoice nor a request for payment so it cannot be used for accounting purposes.

It is used commonly as a quotation or for customs purposes on imports.

What is a proforma invoice?

A proforma invoice is issued before a job is complete. It is an estimate or quote that outlines the goods and services that a seller will provide to their customer.

Pro forma invoices are sent before the goods and services are delivered.

The main purpose of a proforma invoice is to ensure that the seller and their customer are aligned on their agreement, especially about the price of the goods and services.

It should give an overview of the costs and quantities of the products and services.

This is different from a proforma document, which does not include prices.

Learn more about proforma here: Investopedia

What is the purpose of a proforma invoice?

Proforma invoices serve a variety of purposes.

They ensure that the seller and buyer are aligned on their agreement, especially about the price of the goods and services.

Pro forma invoices also help to streamline the sales process.

As a seller, you send the proforma invoice to your client, who then agrees to the price.

You then provide the goods and services and issue an invoice for the payment.

Essentially, they act as an estimate so your customers know what to expect.

Other purposes they serve are:

• Pro forma invoices declare the value of goods for customs for an easy delivery process
• Pro forma invoices are issued when you don’t have all the details needed for a commercial invoice
• Clients use pro forma invoices to get internal purchase approval

What’s the difference between a pro forma invoice and standard invoice?

An invoice is a commercial document that outlines what goods and services were provided and the total amount due for those goods and services.

A proforma invoice is like an estimate and details the goods and services that will be provided to a seller.  A proforma invoice is sent before the actual supply of goods and services and tells a customer what they can expect.  Find out the differences between pro forma and commercial invoices in our detailed tutorial.  

Both pro forma invoices and commercial invoices are formatted similarly.  Both show the same information including business logo, contact information, billing addresses, information about the goods and services, costs, as well as terms and conditions. However, a proforma invoice should be clearly labelled ‘proforma’.

You can use an invoice for accounting purposes but you can’t use a proforma invoice because this occurs prior to the actual sale. 

Can you turn pro forma invoices into commercial invoices?

No, you cannot turn proforma invoices into commercial invoices. While both documents contain similar information, a commercial invoice is a legally binding document that includes specific terms and conditions related to the sale, which are not present in a pro forma invoice.

Proforma invoices simply serve as preliminary estimates and do not obligate either party to complete the transaction, whereas commercial invoices are required for customs clearance and payment processing.

Find out more about payment methods: afponline.org

Is a proforma invoice legally binding?

A proforma invoice is not legally binding and should not be used for accounting purposes.

As it is sent before goods and services are provided, it is closer to an estimate or quote than an invoice.

No sale has occurred when you send a proforma invoice.

Can a proforma invoice be cancelled?

Yes, proforma invoices can be cancelled. Since they are not legal documents or official invoices used for accounting, there’s no need to formally edit or cancel them if the sale isn’t completed.

What to include on a pro forma invoice

The purpose of a proforma invoice is to outline the goods and services you will provide to your client. This means that it should show most of the same information as the final invoice, including:

• A proforma invoice number
• Your company name, address and contact details
• Your customer’s name, address and contact details
• Invoice issue date
• The due date
• Description of the goods and services
• The price of the goods and services
• Terms and conditions
• Payment terms (this isn’t necessary but making them aware earlier may make it easier for them to pay you)
• Tax (while a proforma invoice is not a tax invoice, you should still outline the tax amount they can expect to pay)

Please note that you need to clearly display the words ‘Proforma Invoice’ in your invoice template so your customers know that it is not a sales or tax invoice.

How to make a pro forma invoice using Bookipi

You can generate invoices and more on the Bookipi Invoice app with a few simple steps listed below:

Steps to make a pro forma invoice in Bookipi

Step 1: Make a new pro forma invoice

Press the ‘plus’ button to make a new invoice in Bookipi’s invoice tool.

Step 2: Add details to your pro forma invoice

Enter the details of the goods and services you are providing.

Step 3: Send your pro forma invoice to a client

Save and/or send the invoice to your customer.

Bookipi offers a user-friendly invoice software and invoice templates that allow you to easily create professional invoices. Try Bookipi Invoice app for free to make pro forma invoices in minutes. 

You can also download Bookipi Expense and budgeting app for free to track business and personal expenses.