What is a Proforma Invoice? Meaning, Purpose, and Use in Exports

 

What is a Proforma Invoice

A proforma invoice is a preliminary bill of sale sent to a buyer before a transaction is completed. It outlines the details of the proposed sale — including the products or services, quantities, value, delivery information, and payment terms — but it’s not a legally binding document or a formal demand for payment.

“Pro forma” is Latin for “for the sake of form.” This guide by EximPe serves as an estimated invoice or quote, establishing the seller’s intent and detailing what the buyer should expect once the transaction is finalized. It’s especially important in international trade, where clarity on goods, costs, and terms is critical.

Why Use a Proforma Invoice? (Purpose & Meaning)

Clear cost estimate before sale

This document acts like a formal quote that helps the buyer plan budget, arrange financing, or open a letter of credit — especially important in international trade.

Negotiation & agreement tool

Once the buyer confirms intent, the seller sends a proforma invoice to finalize details like price, delivery terms, and quantity before moving to transaction.

Customs & trade documentation

Customs authorities often require a proforma invoice to assess duties, verify shipment value, or approve import licenses. It helps clear goods even before a formal commercial invoice exists.

Proforma Invoice vs Commercial Invoice vs Quote

It’s important to distinguish a proforma invoice from other common documents:

  • Proforma Invoice vs. Quote: A quote is a simple estimate. A proforma invoice is a more detailed, quasi-formal document used when the buyer’s intent to purchase is strong, acting as a preliminary sales agreement.
  • Proforma Invoice vs. Commercial Invoice:
  • Proforma: Issued before shipment, non-binding, estimated costs, not for accounting/tax.
  • Commercial: Issued after shipment, legally binding, final actual costs, used for customs clearance, accounting, and formal payment request.

When Should Exporters Use a Proforma Invoice?

  • During negotiation after a buyer has signaled intent but before shipment.
  • Whenever the buyer needs to apply for a letter of credit or arrange foreign exchange.
  • If customs authorities require document for import permit, pre-shipment inspection, or duty estimation.
  • When advance payment or internal purchase approvals are needed.

What Should a Proforma Invoice Include? (Format)

A well-drafted proforma invoice typically includes:

  • Title Clearly Marked “Proforma Invoice”
  • Date of Issue and Validity Period
  • Seller’s Name, Address, and Contact Information
  • Buyer’s Name, Address, and Contact Information
  • Unique Invoice Number
  • Item Descriptions (goods/services)
  • Quantities, Unit Prices, and Total Amount
  • Currency for Transaction
  • Expected Delivery Date and Shipping Terms
  • Applicable Taxes, Duties, and Additional Charges
  • Payment Terms and Methods
  • Country of Origin (especially important for exports)
  • Signature of Seller (optional but recommended)

Pro Tip: Always clearly label the document as a “Proforma Invoice” to avoid confusion with commercial or tax invoices.

How to Make a Proforma Invoice: Step-by-Step

  1. Gather All Required Information: Collect details such as buyer/seller info, product specifications, quantities, prices, and delivery requirements.
  2. Draft the Invoice Using a Template: Use a proforma invoice template or accounting software. Clearly mark it as “Proforma Invoice.”
  3. Include All Key Components: Add itemized descriptions, unit prices, totals, shipping, taxes, and payment method.
  4. Specify Export Information: If the invoice is for export, mention country of origin, HS codes, and Incoterms (e.g., FOB, CIF).
  5. State Terms and Conditions: Detail payment timelines, validity period, and any terms related to cancellation, delivery delays, or force majeure.
  6. Review and Send: Check all information, sign if needed, and send to the buyer via email or as required.

Proforma Invoice in Export Transactions

Proforma invoices play a particularly critical role in international sales:

  • Initial Documentation: Initiates the export process once terms are agreed upon between the buyer and seller.
  • Customs Clearance: Needed for import/export paperwork and to estimate duties and taxes.
  • Facilitating Trade Finance: Buyers often need a proforma invoice to secure payment instruments, such as letters of credit or insurance.
  • Assists with Regulatory Compliance: Ensures all relevant authorities can verify transactional details before goods are shipped.

Conclusion

The proforma invoice is an indispensable tool in the export process. It acts as a bridge between a quotation and a final sale, providing clarity, transparency, and the necessary information for importers to facilitate approvals, secure financing, and comply with import regulations. For exporters, mastering how to make a proforma invoice that is comprehensive and accurate is key to streamlining their sales process, building trust, and ensuring smooth international transactions in 2025 and beyond. By understanding its distinct meaning and purpose, businesses can navigate the complexities of global trade with greater confidence.

FAQs

What is a proforma invoice?

A non-binding, preliminary invoice sent before shipment that outlines estimated costs, goods, and terms.

Is a proforma invoice legally binding?

No. It’s essentially a detailed quote — not a demand for payment.

Can a proforma invoice be paid?

Typically, no. Payment is only due upon a commercial (final) invoice, though the proforma may help arrange advance payment or financing.

How is it different from a quote or estimate?

A quote is informal and early in negotiation; a proforma invoice is more formal: buyer intent confirmed and detailed terms set.

What should a proforma invoice format include?

Seller/buyer details, itemized goods, costs, delivery/payment terms, validity date, and clear labeling as “proforma.”

When is it needed in exports?

For customs valuation, import permits, trade financing, letter of credit applications, or buyer internal approvals.

Can I change a proforma invoice after sending?

Yes. Since it’s non‑binding, it can be updated if terms or costs change before buyer approval.

How long is a proforma invoiceit valid?

Validity is typically stated explicitly — common range is 30–90 days — due to possible changes in cost, currency, or policy.

Who prepares a proforma invoice?

The seller or exporter creates and sends the proforma invoice to the buyer.

Does EximPe offer a proforma invoice generator?

No, EximPe does not offer a dedicated proforma invoice generator. However, it does provide a regular invoice generator for creating standard sales invoices, which you can access here: EximPe Invoice Generator.

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