Proforma invoice: a quote that looks like a bill, and is not one

A proforma invoice is a document issued before a sale is completed that sets out exactly what will be supplied, at what price, on what terms. It looks like an invoice and is deliberately formatted like one — but it creates no payment obligation, carries no invoice number from your sales sequence, and must never be posted to the ledger as revenue.

The buyer needs it precisely because it looks official. It is what a customer takes to their bank to open a letter of credit, to their finance department to raise a purchase order, or to their customs authority to apply for an import permit. A quotation on letterhead will not do any of those jobs.

What a proforma invoice contains

• The word "Proforma" prominently on the face of the document — not in small print.
• Seller and buyer details, as they will appear on the final invoice.
• A full description of the goods or services, with quantities and unit prices.
• Total value, currency, and any discounts stated the way they will actually apply.
• Delivery terms — the incoterm and named place — and the expected shipment date.
• Payment terms: deposit, balance, method, and what happens if the buyer pays late.
• A validity period, after which the quoted prices lapse.
• A reference number from a separate proforma sequence, never from the sales invoice sequence.

The last two items are what turn a proforma from a courtesy into a working document. Without a validity date you are bound to a price indefinitely in the buyer’s mind; without a separate numbering sequence you eventually issue a real invoice with a number already used, and the audit trail breaks.

Where it is genuinely required

1. Opening a letter of credit: the issuing bank works from the proforma to write the credit’s terms, so any error in it becomes a discrepancy later.
2. Import licences and foreign exchange approvals: many authorities require a proforma before releasing permission to buy.
3. Advance payments: the buyer needs a document to pay against before goods exist.
4. Customs valuation of samples or goods shipped without sale, where a commercial invoice cannot be issued.
5. Internal approval: large buyers cannot raise a purchase order from an email.

Do not record a proforma as receivable, and do not report tax on it. In most jurisdictions the tax point arises on the real invoice or on payment, not on a proforma — and a proforma sitting in the sales ledger is the classic cause of a VAT return that has to be corrected.

Proforma, commercial invoice, quotation

A quotation is an offer to sell at a price. A proforma invoice is that offer expressed in invoice form, with the shipment terms and payment mechanics filled in, so the buyer can act on it institutionally. A commercial invoice is issued when the goods actually ship: it is a customs document and a demand for payment at the same time.

The three should agree. When the shipment differs from what the proforma promised — a partial quantity, a substituted item, a changed incoterm — reissue the proforma or note the variance explicitly. A commercial invoice that silently contradicts the proforma the buyer’s bank was working from causes exactly the discrepancy that stops payment.

Because the same lines end up on a proforma, then on the commercial invoice, then on the customer’s statement, they are best written once. Ettex Invoices issues the proforma from the order, then converts it into the real invoice when the goods ship — keeping the numbering sequences separate, the currency and terms identical, and the proforma out of the revenue figures until it becomes an invoice.