Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
What is a Proforma Invoice? Definition + Examples
As taught in the Junior Procurement Management Course / ★★★★★ 4.9 rating
What is a proforma invoice?
- A proforma invoice is a preliminary bill of sale issued by the seller before goods or services are delivered, without requesting payment.
- A proforma invoice serves as a detailed quote that lets the buyer and seller confirm price, quantity, and terms before the final commercial invoice is issued.
- As a “good-faith” estimate, a proforma invoice facilitates customs clearance and internal approvals before the transaction becomes binding.
What is a Proforma Invoice?
A proforma invoice in procurement serves as a crucial step in supplier–buyer negotiations and planning. Before issuing a purchase order or finalizing a contract, procurement teams request a proforma invoice to verify costs, quantities, and terms without creating a payable obligation.
It outlines unit prices, delivery schedules, incoterms, duties, and fees so sourcing specialists can compare supplier quotes, assess total landed cost, and align budgets.
Although it carries no accounting or legal weight like a final commercial invoice, a procurement-focused proforma invoice provides a “good-faith estimate” that helps purchasers confirm supplier capability, manage cash-flow forecasts, and ensure compliance (e.g., import/export regulations or contract stipulations) before proceeding to award a purchase order and trigger payment.
How to Create a Proforma Invoice
A proforma invoice in procurement functions as a non-binding, preliminary quote that sellers issue to buyers during sourcing and supplier negotiations.
By clearly labeling itself as a “proforma invoice,” it provides procurement teams with essential line-item details (unit prices, quantities, delivery terms, incoterms, and estimated duties), allowing for internal budget approvals, total landed cost calculations, and comparison of multiple supplier quotes.
In cross-border procurement, this document also serves customs authorities by outlining invoice value and harmonized tariff codes to estimate import duties.
Because a proforma invoice carries no legal obligation or accounting entry, it acts as a “good-faith estimate” that procurement professionals use to validate supplier commitments, refine order specifications, and manage cash-flow forecasts before issuing the final commercial invoice or purchase order.
1. Gathering All Relevant Information
Collect basic seller details (name, address, contact, tax ID) and buyer details (name, address, contact).
Define the order items (codes, descriptions, quantities, unit prices, dimensions, and weight) as well as estimated shipping, insurance, customs duties, and taxes.
The more precise the data, the less likely you’ll need revisions later.
2. Choosing or Creating a Template
Select a proforma template from your ERP or invoicing system, or create a simple document in Word or Excel.
The template must clearly state “PROFORMA INVOICE (Not a Tax Invoice),” include a unique reference number (e.g., PF-2025-001), the issue date, and the price validity date.
Its structure should mirror your final invoice for easy conversion.
3. Filling in Key Elements
Enter the reference number and dates (issue date and validity). Add seller and buyer information. List each line item with its code, description, quantity, unit price, and line total.
Include subtotals, estimated shipping, insurance, and customs duties, then calculate the “Estimated Total Amount.” Specify delivery terms (Incoterms) and payment terms.
4. Clearly Labeling the Document
Make sure “PROFORMA INVOICE” appears prominently in bold, and include a note such as “This invoice is not a tax invoice, do not post to accounts.”
Do not use your regular “Invoice Number” field; instead, use a reference code (e.g., PF-2025-010). Omit a “Payment Due Date” field; instead, write “Payment Terms: see notes below.”
This prevents accidental posting in accounting.
5. Review and Alignment with the Buyer
Send the proforma invoice to the buyer for verification. The buyer may request changes (quantity, pricing, shipping method).
Update the document accordingly and add a version suffix (e.g., PF-2025-010-V2). Only when both parties agree on all details do you proceed to issue the final commercial invoice.
6. Converting to a Commercial Invoice
Copy all agreed-upon items into your standard invoice template, maintaining the same descriptions and prices unless negotiated otherwise.
Assign a new invoice number from your regular sequence (e.g., INV-2025-1023), add a “Payment Due Date,” and remove the “Not a Tax Invoice” note.
If required, include any additional legal elements (VAT number, customs information). Send the final document to the buyer and customs authorities if it’s an international shipment.
Proforma Invoice Example
1. Inditex (Zara): Sourcing Fabrics from Asia
Inditex, the parent company of Zara, maintains a vast network of garment factories and material suppliers, many of which are located in Bangladesh, India, and Vietnam. Before any fabric shipments leave Asia for Zara’s distribution centers in Spain or Portugal, the suppliers issue a proforma invoice to Inditex’s sourcing office.
That proforma document lists the exact yardage of fabric, unit price per meter, anticipated freight costs (e.g., ocean freight from Kolkata to Valencia), insurance fees, and estimated customs duties. Inditex’s finance team uses the proforma invoice to lock in budget approvals and secure short-term letters of credit.
Customs brokers in Spain also rely on the proforma to estimate import duties before the goods physically arrive, eliminating delays at the port.
Only after Inditex confirms the proforma and transfers the agreed deposit do the factories finalize production schedules and arrange actual shipment documentation.
2. Siemens Healthcare: Exporting Medical Devices Worldwide
Siemens Healthcare frequently exports complex diagnostic equipment, such as MRI machines and X-ray units, to hospitals in Latin America, Africa, and Southeast Asia.
Once a hospital submits an order, Siemens’ export team issues a proforma invoice that itemizes every component, such as the magnet assembly, control console, and software license, alongside fees for installation, calibration, and on-site training. It also includes estimated shipping costs (usually airfreight, given the delicate medical parts), projected customs duties for the destination country, and any temporary import bond fees if the equipment is provided under a lease.
The buyer’s procurement team uses the proforma invoice to obtain internal approval from their Ministry of Health (or parent university), and sometimes to arrange project financing or government tender compliance. Only after Siemens receives an advance payment (often 30 % of the proforma total) does it convert the document into a commercial invoice, supply the final export license, and hand over the official invoice to clearing agents.
3. Samsung Electronics: Pre-Shipment Billing for Consumer Electronics
Samsung’s mobile division regularly ships large volumes of smartphones and tablets from its factories in South Korea and Vietnam to distributors across Europe, the Middle East, and Africa. Before each container load, Samsung’s logistics team issues a proforma invoice to its regional distributor (for instance, a U.K. electronics wholesaler).
This proforma lists model numbers, unit quantities, ex‐works pricing (e.g., per-unit factory cost), plus an estimate of sea freight to the Port of Rotterdam, insurance, and any anticipated import VAT. The U.K. distributor uses the proforma invoice to finalize their budget, calculate resale pricing, and secure short-term inventory financing from their bank.
Customs pre-advice is also filed on this proforma basis so that once the container arrives, duties and VAT can be calculated immediately. Only after Samsung receives the distributor’s signed proforma confirmation and deposit does it issue the official commercial invoice, which triggers the final payment terms.
How Does a Proforma Differ From Other Types of Invoices?
Pro Forma Invoice vs. Final Invoice
In procurement, a proforma invoice serves as a preliminary, non-binding document issued by the seller before goods are shipped or services rendered, whereas a final (commercial) invoice is the definitive, binding request for payment issued post-delivery. Proforma invoices in sourcing outline estimated costs (item descriptions, quantities, unit prices, shipping charges, insurance premiums, and projected duties) to ensure both procurement and finance teams agree on terms before committing to a purchase order. In contrast, a final invoice formally documents the completed transaction, carries a unique invoice number, specifies payment terms (e.g., Net 30), and is recorded in the buyer’s and seller’s accounting systems.
Timing and legal relevance set them apart. Procurement professionals request a proforma invoice once a purchase requisition or contract is approved, but before production or shipment begins, using it as a “good-faith” estimate for budget sign-off or customs pre-clearance. It is clearly labeled “Proforma Invoice” and marked “Not a Tax Invoice” to prevent its entry into accounts payable or receivable. Conversely, the final invoice is generated only after goods are delivered or services completed; it converts provisional figures into fixed amounts, triggers accounting entries, and legally obliges the buyer to remit payment by the due date specified.
Their content requirements also differ. A procurement-focused proforma invoice must include enough detail, such as Harmonized System (HS) codes, country of origin, and estimated values, for customs to calculate duties, but it can omit fields like a unique invoice number and formal payment terms. A final invoice duplicates those line-item details and adds all mandatory legal and tax elements (seller’s and buyer’s tax IDs, final amounts (including VAT or sales tax), explicit payment due dates, and a non-reusable invoice number) to satisfy both international trade regulations and internal accounting standards, ensuring the sale can be closed.
Conclusion
A proforma invoice is a non-binding, preliminary document a seller issues before goods are delivered or services rendered, serving as a “good-faith” estimate of costs. In procurement, its primary function is to provide detailed line-item information—descriptions, quantities, unit prices, shipping fees, insurance, and estimated duties—so that purchasing teams can confirm budgets, compare multiple supplier quotes, and obtain internal approvals. Clearly labeled “Proforma Invoice” and marked “Not a Tax Invoice,” it prevents accidental accounting entries and helps buyers manage cash-flow forecasts and import planning before converting it into a binding commercial invoice.
Once the buyer verifies all details and, if required, submits a deposit, the proforma invoice is turned into a final commercial invoice. The commercial invoice carries a unique number, specifies payment terms (e.g., Net 30), and includes all mandatory legal and tax elements, seller’s and buyer’s tax IDs, final amounts (including VAT or sales tax), and precise delivery terms, ensuring compliance with accounting standards and international trade regulations. At this point, it becomes a legally binding document that triggers accounting entries and obliges the buyer to remit payment by the specified due date.
Frequentlyasked questions
What is a proforma invoice?
A proforma invoice is a preliminary bill of sale issued by the seller before goods or services are delivered, without requesting payment.
What is the main step in creating a proforma invoice?
The main step in creating a proforma invoice is gathering all relevant seller and buyer information, item details, and cost estimates so the document can accurately reflect the proposed transaction.
What is the main difference between a proforma invoice and other invoices?
The main difference between a proforma invoice and other invoices is that a proforma invoice is a non-binding estimate not recorded in accounting ledgers, whereas other invoices legally obligate payment and trigger accounting entries.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
