Proforma Invoice

A proforma invocie is a preliminary invoice for payment sent to buyers in advance of shipment of goods or service delivery.
Does not require payment.

A pro forma invoice includes a description of the item, the total amount due, and other transaction details.

Purpose of proforma invoice

Show how much the goods or services will cost to help the buyer decide if they want to continue with the purchase.

In many ways, a proforma is closer to a quote or estimate than an invoice. This is because clients are not required to pay the amount stated on the pro forma, the total amount owed is not taken into account in the client's accounts payable or your receivables, and you cannot use the pro forma to recover VAT.

Essentially, this is information for the buyer so that he knows in advance what to expect and under what conditions.
For example, if payment is required in advance to secure financing before you begin producing goods or providing services, you can use a proforma to offer details of the upcoming transaction.

When can you use a proforma invoice?

A pro forma is usually sent to the buyer or client when they have expressed interest in purchasing, but a formal invoice cannot be sent yet as the final details still need to be confirmed. Once the customer agrees with everything, you deliver the goods and issue an official invoice.

What to include in a proforma invoice

The main purpose of a proforma invoice is to show your client the details of the proposed transaction. Therefore, it should include the same information as the final invoice:

Unique invoice number
Your company name, address and contact details
Your client's name and address
Date of issue and due date
Description of product or service
How long is the price valid
Reference to any applicable terms or conditions
Terms of payment (give him instructions on how he will pay)
VAT (indicate the expected amount of VAT)

Unlike a final invoice, a pro forma invoice includes:

The term "proforma invoice" so that your client knows that this is not an invoice or tax invoice
The phrase “This document is not an obligation for the parties”,
The phrases “The final amount to be paid must be clarified after agreement”.

Common practice in advanced economies:

The pro forma includes virtually all of the same information that appears on the final invoice, but it does not carry the same legal weight and should not be used for accounting purposes or as a binding agreement.
Pro forma invoices are not considered commercial invoices and are not subject to the same rules and regulations. This means that they do not have to include detailed VAT information. However, there are some advantages to including this information. First, since pro forma invoices can be considered draft invoices, it is important that they are as close to the final “official” invoice as possible. Including VAT information gives clients a more accurate idea of how much they can expect to pay.