The short answer
- A proforma invoice is a preliminary document that describes a sale before it happens, with the same details as an invoice.
- It isn’t an accounting document: HMRC says a proforma cannot be treated as one, and should preferably be marked “This is not a VAT invoice”.
- It’s used mostly for exports (customs, import licences, opening a letter of credit), to request a deposit, or so the buyer can secure financing or internal approval.
- In the UK, once you receive payment or make the supply, a proper VAT invoice is due within 30 days.
- Label it clearly “Proforma invoice”, number it separately, give it an expiry date, and issue the real invoice once the sale takes place.
What is a proforma invoice?
Pro forma is Latin for “as a matter of form” (you’ll also see pro forma and pro-forma). A proforma invoice copies the layout of an invoice (seller, buyer, description, quantities, prices, terms), but it’s issued before the sale. It shows what the invoice will look like if the buyer confirms.
In practice it works as an offer: it commits you to the stated prices and terms for the validity period, and once the buyer accepts it in writing (a signature, a purchase order, a deposit), you have a deal. What it doesn’t do is create revenue in your accounts, and it isn’t evidence your buyer can use to reclaim input VAT.
What a proforma invoice is used for
1. Exports and imports
This is the most frequent reason buyers ask for one. Before goods are shipped, the buyer or their bank needs a document detailing what’s coming, for how much and on what terms. Depending on the country, a proforma is used to obtain an import licence, declare the import in advance, or open a letter of credit.
Two examples:
- Ghana: importers must file an Import Declaration Form before the goods arrive, and banks may ask for a signed proforma to open a letter of credit (Ghana Revenue Authority).
- United States: if the commercial invoice isn’t available at entry, the importer can file a pro forma invoice in the format set by customs regulations; the real invoice must then follow within 120 days, under a bond (19 CFR 141.91).
A banking trap to know: the proforma helps the buyer’s bank open a letter of credit, but under the International Chamber of Commerce’s banking practice (ISBP 745), the invoice you present to get paid under that credit must not be titled “pro-forma” unless the credit expressly allows it.
2. Requesting a deposit
For custom orders or large equipment, a proforma lets you ask for payment in advance on a clear basis. In the UK, receiving a payment creates a tax point: a full VAT invoice must then be issued within 30 days. Plan the deposit invoice, then a final invoice for the balance.
3. Enabling financing
A bank, a grant body or a company’s purchasing department often needs a costed document before releasing funds: an equipment grant, for example, may be paid against the proforma for the machine being bought.
4. Shipping goods with no sale
For samples, free replacements or returns sent outside your customs area, carriers and customs usually ask for a proforma stating a customs value, even though nothing is being sold.
Proforma vs quote vs commercial invoice
| Quote | Proforma invoice | Commercial invoice | |
|---|---|---|---|
| When | Before the sale | Before the sale | At or after shipment/supply |
| Purpose | Propose a price | Preview the invoice, support formalities | Request payment, clear customs, record the sale |
| Accounting value | No | No | Yes |
| Binds the buyer | Once accepted | Once accepted | Yes |
| Numbering | Quote sequence | Its own sequence | Your invoice sequence |
| Tax to account for | No | No | Yes, if applicable |
When
QuoteBefore the sale
Proforma invoiceBefore the sale
Commercial invoiceAt or after shipment/supply
Purpose
QuotePropose a price
Proforma invoicePreview the invoice, support formalities
Commercial invoiceRequest payment, clear customs, record the sale
Accounting value
QuoteNo
Proforma invoiceNo
Commercial invoiceYes
Binds the buyer
QuoteOnce accepted
Proforma invoiceOnce accepted
Commercial invoiceYes
Numbering
QuoteQuote sequence
Proforma invoiceIts own sequence
Commercial invoiceYour invoice sequence
Tax to account for
QuoteNo
Proforma invoiceNo
Commercial invoiceYes, if applicable
For a local client, an accepted quote is usually enough. A proforma is most useful when a third party (customs, a bank, a funder) needs to see an invoice-style document. Don’t confuse it with a purchase order, which is issued by the buyer, not the seller.
What to include on a proforma invoice
There’s no single legal template, but to be useful a proforma should contain everything the final invoice will, plus a few export extras.
| Description | Qty | Unit price | Total |
|---|---|---|---|
| Coffee roaster, 15 kg batch | 2 | £6,400.00 | £12,800.00 |
| Spare parts kit | 2 | £450.00 | £900.00 |
This is not a VAT invoice. Terms: 30% deposit with order (£4,296.00), balance before shipment. Country of origin: United Kingdom. Estimated gross weight: 820 kg. Incoterm: FCA Felixstowe container terminal, Incoterms® 2020.
- “Proforma invoice” clearly shown, with its own numbering.
- The date and how long the offer is valid.
- Full seller and buyer details, including countries and the exporter’s EORI number.
- Precise descriptions, quantities, unit prices and totals.
- Extra costs consistent with the Incoterm (here the seller pays carriage to the named terminal).
- Payment terms, country of origin, weight, and “This is not a VAT invoice”.
For exports, add as needed:
- the Incoterm and its version (“Incoterms® 2020”), consistent with the costs you charge. For containers, the ICC points you to FCA rather than FOB, which is meant for conventional sea and inland-waterway shipments;
- the goods’ country of origin and HS tariff codes;
- weights and number of packages;
- your EORI number and bank details for international payment;
- “This is not a VAT invoice”.
Mistakes to avoid
- Leaving out the word “proforma”. A document that looks like a VAT invoice can be treated as one.
- Using your invoice numbers. Proformas need their own sequence, or you’ll leave gaps in your invoice series.
- Taking a deposit and forgetting the VAT invoice. In the UK, the 30-day clock starts when you’re paid.
- Costs that contradict the Incoterm. Charging carriage to a port under a term where the buyer pays it creates disputes and customs mismatches.
- Differences between proforma and final invoice. In exports, a mismatch in quantity or price can hold up customs. Update the proforma if the order changes.
Step by step: from proforma to invoice
- 1The buyer asksThey need a document for their bank, customs or funder.
- 2ProformaYou issue it with a validity period, an Incoterm and payment terms.
- 3Acceptance and depositThe buyer confirms and pays the agreed deposit.
- 4Deposit invoiceYou invoice the deposit (a VAT invoice within 30 days in the UK).
- 5Shipment and commercial invoiceYou ship and issue the final invoice, less the deposit.
And in Binome360?
Binome360 handles quotes and invoices. For most local clients, a quote sent as a link does the same job as a proforma, and they can accept it online. Once accepted, it becomes an invoice in one tap. For export formalities that require a specific proforma format, check what your freight forwarder or your buyer’s bank needs.
Quote for Accra Roasters: 2 coffee roasters at £6,400 and 2 spare parts kits at £450, plus £620 carriage to Felixstowe
Ready: a quote for Accra Roasters Ltd, £14,320 in total. Save it? You can send it as a link and the client can accept it online.
Once accepted online, the quote becomes an invoice in one tap.
Try Binome360 for freePrepare the quote in one sentence, send it as a link, and turn it into an invoice when the client accepts.
- Quotes and invoices numbered separately and automatically
- A shareable link: the client reads, downloads a PDF and accepts online
- An accepted quote becomes an invoice with the same lines
- Paid and overdue invoices at a glance
Frequently asked questions
Is a proforma invoice mandatory?
No. It’s optional, issued at the buyer’s request or for a formality. A real invoice is required in most countries once a business sale takes place; in the UK, a VAT invoice is required whenever both you and your customer are VAT-registered.
Do I charge VAT or sales tax on a proforma?
You can show the tax that will apply so the buyer sees the full cost, but a proforma doesn’t create a tax liability on its own and can’t be used by your buyer to reclaim VAT. Tax is accounted for on the real invoice, including any deposit invoice.
Can a proforma be cancelled?
Yes, until the buyer accepts it or the validity period runs out. After acceptance, treat changes like any change to an agreed order: issue a revised proforma and get it accepted again.
Can I issue a proforma in a foreign currency?
Yes, in dollars, euros or any agreed currency. If VAT applies in the UK, only the total VAT has to be shown in sterling on the VAT invoice.
In short
A proforma invoice previews a sale in invoice form. It’s mainly used for export formalities, deposits and financing requests, and it has no accounting value. Before sending one, check five things: “Proforma invoice” in the title, its own number, an expiry date, an Incoterm consistent with the costs, and the deposit invoice ready if money comes in.
Sources
- HMRC internal manual VATREC9010 and VATREC9020 (proforma invoices; VAT invoice within 30 days): gov.uk; VATREC5060 (foreign-currency invoices).
- GOV.UK, “Invoicing and taking payment from customers”: gov.uk/invoicing-and-taking-payment-from-customers.
- International Chamber of Commerce, Incoterms® 2020 rules and International Standard Banking Practice (ISBP 745), paragraph C1.
- US Code of Federal Regulations, 19 CFR 141.85 and 141.91 (pro forma invoices at entry): law.cornell.edu.
- Ghana Revenue Authority, Customs import procedures: gra.gov.gh.
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