Proforma Invoice
A Proforma Invoice is a preliminary invoice the seller issues before the goods are shipped. It sets out the description, quantity, unit and total price, Incoterms, and payment and delivery terms of a proposed sale — in effect a formal quotation in invoice form. It is not a demand for payment and not used for accounting; it commits the parties to the deal's terms.
The proforma invoice serves several practical purposes: it lets the buyer arrange finance, open a letter of credit, apply for an import licence or foreign exchange, and gives customs an advance basis for estimating duties. Once the goods ship, it is replaced by the commercial invoice, which is the definitive document for payment and customs. Accurate, consistent proforma invoices smooth the start of an international transaction.
Before money and goods move, the buyer often needs a formal document to open a letter of credit, secure an import permit or arrange foreign exchange — the proforma invoice provides it. Getting its terms right sets up the whole transaction cleanly, because the commercial invoice, customs value and payment all flow from what it stated.
Is a proforma invoice a real invoice?
No — it is a preliminary quotation in invoice form, not a demand for payment or an accounting document; the commercial invoice replaces it once goods ship.
What is a proforma invoice used for?
Arranging finance, opening a letter of credit, applying for import licences or foreign exchange, and estimating duties in advance.