Proforma Invoice Guide: What It Is, When to Use It, and How to Create One

If you've been asked to send a proforma invoice and aren't entirely sure what that means, you're not alone. Proforma invoices are one of the most commonly misunderstood business documents, and getting them wrong can cause confusion for both you and your clients. This guide explains exactly what a proforma invoice is, when you should use one, how it differs from a standard invoice, and how to create one that looks professional and covers all the essentials.

What Is a Proforma Invoice?

A proforma invoice is a preliminary document sent to a buyer before goods are delivered or services are performed. Think of it as a “draft invoice” or a formal quotation. It outlines the expected costs, terms, and details of a transaction so the buyer can review and approve them before committing.

The term “proforma” comes from the Latin phrase “pro forma,” meaning “for the sake of form” or “as a matter of formality.” That's a good way to think about it: a proforma invoice provides the form and structure of an invoice without carrying the legal obligation of a final invoice.

Crucially, a proforma invoice is not a demand for payment. It is an estimate or a commitment to provide goods or services at the stated price. Payment is not due until a final, official invoice is issued after the work is completed or the goods are shipped.

Proforma Invoice vs. Regular Invoice: Key Differences

The distinction between a proforma invoice and a regular (or “commercial”) invoice matters for accounting, tax, and legal purposes. Here's how they compare:

The most important distinction is that a proforma invoice is not an accounting document. You cannot use it to record revenue, and your client cannot use it to reclaim VAT. A final invoice must always follow.

When Should You Use a Proforma Invoice?

Proforma invoices are useful in a range of business situations. Here are the most common scenarios where sending one makes sense:

1. International Trade and Customs

This is perhaps the most traditional use of proforma invoices. When shipping goods internationally, customs authorities in the destination country often require a proforma invoice to assess duties and taxes before the goods arrive. The document helps customs officials understand the nature, value, and origin of the shipment. Importers also use proforma invoices to apply for import licences or arrange letters of credit with their banks.

2. Requesting Advance Payment or a Deposit

If you require a deposit before starting work, a proforma invoice provides a formal, professional way to request that payment. It shows the client exactly what they're paying for, the total project cost, and how much is due upfront. This is especially common in freelance work, custom manufacturing, and event services where materials need to be purchased or time needs to be blocked off before the project begins.

3. Providing a Formal Quote or Estimate

While a standard quotation document works fine for many businesses, some clients — particularly larger companies or those in regulated industries — prefer to receive a proforma invoice because it can be fed directly into their purchasing or procurement system. It's more structured than a simple quote email and provides all the detail a purchasing department needs to raise a purchase order.

4. Internal Budgeting and Approval

Many organisations require a formal cost document before they can approve a purchase. A proforma invoice serves this purpose perfectly. Your client's team can circulate it internally, get budget approval, and then confirm the order — all without you having to issue a binding invoice prematurely.

5. When the Final Price Isn't Confirmed Yet

If you're providing services where the final cost depends on variables like time spent, materials used, or exchange rates, a proforma invoice lets you give the client a good-faith estimate while making it clear that the final amount may differ. This is common in consulting, construction, and any project-based work where scope can shift.

What to Include in a Proforma Invoice

A proforma invoice should look very similar to a regular invoice, with one critical addition: it must be clearly labelled as a proforma. Here's what to include:

• The words “Proforma Invoice” — displayed prominently at the top. This prevents any confusion with a final invoice and ensures your client's accounts team doesn't accidentally process it as a payment request.
• Your business details — company name, address, email, phone number, and VAT number if registered
• Client details — their company name, billing address, and contact person
• A reference number — use a distinct numbering system for proforma invoices (e.g., PF-001) so they don't get mixed up with your regular invoice sequence
• Date of issue — when the proforma was created
• Validity period — how long the quoted prices are valid (e.g., “Valid for 30 days from date of issue”). Prices change, so you don't want a client accepting a proforma six months later at outdated rates.
• Itemised list of goods or services — descriptions, quantities, unit prices, and line totals
• Subtotal, tax, and total — show any applicable VAT or tax separately
• Payment terms — how payment will work once the order is confirmed (e.g., “50% deposit on confirmation, balance on delivery”)
• Delivery or completion timeline — estimated delivery date or project timeline
• Terms and conditions — any relevant terms around cancellation, changes, or liability

How to Number Proforma Invoices

Keep your proforma invoice numbers separate from your regular invoice numbers. This is important for two reasons: it prevents confusion in your accounting records, and it ensures HMRC (or your tax authority) can clearly see which documents are proformas and which are final invoices.

A common approach is to use a prefix like PF- followed by a sequential number (PF-001, PF-002, etc.) or to incorporate the year (PF-2026-001). Some businesses use the client name or project code as well (PF-ACME-001). Choose whatever system works for you, but be consistent.

When a proforma invoice is later converted into a final invoice, the final invoice gets its own number from your regular invoice sequence. You can include a reference to the original proforma number on the final invoice for traceability — for example, “Related proforma: PF-2026-014.”

Proforma Invoice vs. Quotation: What's the Difference?

This is another common source of confusion. Both proforma invoices and quotations provide estimated costs before work begins. The differences are subtle but meaningful:

• A quotation is a sales document. It's part of the negotiation process and may go through several revisions before both parties agree on terms.
• A proforma invoice is a pre-billing document. It usually comes after the negotiation is complete and represents a near-final agreement on what will be delivered and at what price.
• Quotations are more common in early-stage sales conversations. Proforma invoices are more common once a deal is agreed in principle and the client needs a formal document for purchasing, customs, or budget approval.
• In practice, many small businesses use the terms interchangeably. If your client asks for a “proforma,” they typically want a formal cost breakdown they can use for internal approval — so format it like an invoice, label it clearly, and include all the relevant details.

Common Mistakes to Avoid with Proforma Invoices

Proforma invoices are straightforward, but these mistakes come up surprisingly often:

• Not labelling it as a proforma — if you send a document that looks exactly like an invoice but is meant to be a proforma, your client's accounts team may process it as a real invoice. Always include “Proforma Invoice” clearly at the top.
• Using regular invoice numbers — proformas should have their own numbering sequence. Mixing them into your regular invoice numbers creates gaps in your accounting records and confusion at tax time.
• Forgetting a validity period — prices change. If you issue a proforma in February and the client doesn't act on it until August, your costs may have increased. Always state how long the proforma is valid.
• Not following up with a final invoice — a proforma is not a substitute for a real invoice. Once the goods are delivered or services completed, you must issue a proper invoice. Some businesses forget this step and end up with uncollected revenue.
• Including the proforma in your accounts — a proforma invoice should not be recorded as revenue or included in your VAT return. It's a preliminary document only. Only the final invoice gets booked.
• Being vague about what's included — just like a regular invoice, a proforma should clearly describe what the client is getting. Vague line items like “consulting services” invite questions and delays. Be specific: “Brand strategy workshop (full day, up to 8 attendees)” is much better.

Proforma Invoices and VAT in the UK

If you're VAT registered in the UK, it's important to understand how proforma invoices interact with VAT rules:

• A proforma invoice is not a valid VAT invoice. HMRC does not recognise proforma invoices for VAT purposes.
• You cannot charge VAT on a proforma invoice in a way that allows the buyer to reclaim it. The buyer needs a proper VAT invoice for that.
• If you show VAT on a proforma, make sure it's clearly labelled as an estimate. The actual VAT charge appears on the final invoice.
• When the transaction is completed and you issue the final invoice, that invoice must meet all HMRC requirements for a valid VAT invoice (including your VAT number, the VAT rate, and the VAT amount).

In short: show estimated VAT on the proforma if it's helpful for the client's budgeting, but always follow up with a proper VAT invoice that complies with HMRC requirements.

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

Here's a straightforward process for creating a proforma invoice:

1. Start with your standard invoice template. A proforma invoice has the same layout and fields as a regular invoice — the only difference is the label and the fact that it's not a demand for payment.
2. Change the title to “Proforma Invoice.” Make this prominent and unmistakable.
3. Assign a proforma reference number. Use a separate sequence (PF-001, PF-2026-001, etc.).
4. Fill in your business details and the client's details. Include full company names, addresses, and contact information.
5. Add the date and validity period. For example: “Issued: 10 February 2026. Valid until: 12 March 2026.”
6. List each item or service with a description, quantity, unit price, and line total. Be specific and detailed.
7. Show the subtotal, any applicable tax (estimated), and the total.
8. Include payment terms and delivery timeline. Explain what happens next: “Upon acceptance, a 50% deposit is required. Balance due on completion.”
9. Add any relevant terms and conditions.
10. Send it to the client and wait for confirmation before proceeding.

Converting a Proforma Invoice to a Final Invoice

Once the client accepts the proforma and the work is done (or goods are shipped), you need to convert it into a final invoice. This is simple:

1. Create a new invoice using your regular invoice numbering sequence.
2. Copy the details from the proforma, adjusting any amounts that changed during the project.
3. Remove the “Proforma Invoice” label and replace it with “Invoice” (or “Tax Invoice” if you're VAT registered).
4. Add the correct invoice date, due date, and payment instructions.
5. Reference the original proforma number for traceability.
6. Send the final invoice to the client as the official payment request.

The final invoice is the document that goes into your accounting records, your VAT return, and your client's accounts payable.

Create Professional Proforma Invoices with InvoiceForge

Whether you need a proforma invoice for a new client, an international shipment, or a deposit request, the process starts with a clear, professional document. InvoiceForge lets you create polished invoices in under 30 seconds — fill in the details, customise the line items, and download a clean PDF. Simply add “Proforma Invoice” as the document title and you've got a professional proforma ready to send. When the deal is confirmed, create the final invoice just as easily.