What Is a Proforma Invoice: Meaning, Format, Example, & Uses

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By Raseed Raseed Editorial Team

Last Updated Nov 4, 2026 · 3:48 PM

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A customer is interested in your products or services, but they are not ready to confirm the order yet. They want to know the total cost, quantities, taxes, delivery charges, and payment terms before making a decision.

This is where a Proforma Invoice can be useful.

A proforma invoice brings the proposed transaction details together in an invoice format, giving the buyer a clear picture of what the purchase may involve. It can be reviewed, discussed, and revised before the actual transaction is completed.

But a Proforma Invoice is not the same as a final tax invoice. Understanding this difference is important when using one in your sales process.

So, what exactly does a proforma invoice mean? When should you use one? What should it contain? And how can you create one?

Let’s take a closer look.

Proforma Invoice Meaning

The term pro forma comes from Latin and means “for the sake of form.” In business, a proforma invoice is a preliminary document prepared in an invoice format to show the expected details of a proposed transaction.

It is not a final bill or a completed sale. Instead, it works much like a detailed quotation, giving the buyer information about what the proposed transaction will include.

A Proforma Invoice can contain:

Product or service details
Quantity and pricing
Applicable taxes
Discounts
Shipping or delivery charges
Payment terms
Delivery information
Validity period

For the seller, it provides a structured way to communicate the proposed deal. For the buyer, it provides a reference to review the expected cost and terms before confirming the order.

What Is a Proforma Invoice Actually Used For?

Imagine a supplier providing raw materials to a manufacturing company.

The buyer wants to know the price of each material, quantity, applicable taxes, delivery charges, and payment terms before making an advance payment. Instead of sending these details through separate emails or messages, the supplier can prepare a Proforma Invoice.

The buyer can review the document and request changes if the quantity, price, or terms need to be discussed. Once both parties agree and the actual supply takes place, the appropriate final invoice can be issued.

This is the main purpose of a proforma invoice. It helps both sides understand the proposed transaction before it moves to the final billing stage.

Why Do Businesses Use Proforma Invoices?

A proforma invoice can be useful in several situations where the buyer needs detailed information before confirming a transaction.

Before Confirming an Order

For larger or customized orders, buyers may want to review the complete cost before placing the order. A proforma invoice gives them the details in one place.

For Advance Payments

When a seller expects an advance payment before starting production or arranging an order, the proforma invoice can show the proposed amount and payment terms.

For Internal Approvals

Businesses may need approval from procurement, finance, or management before making a purchase. A detailed proforma invoice gives these teams a structured view of the expected expense.

For International Transactions

Businesses involved in international trade may use proforma invoices to communicate proposed product, pricing, currency, and shipping information before the final commercial documentation is prepared.

The exact documentation required can vary depending on the transaction and applicable trade or customs requirements.

How Does a Proforma Invoice Help?

A Proforma Invoice can make the early stages of a transaction easier for both buyers and sellers.

Provides clear cost information

The buyer can see the expected price along with applicable taxes, discounts, and other charges before confirming the purchase.

Reduces pricing misunderstandings

When quantities, prices, and terms are documented clearly, both parties have a common reference for what was proposed.

Supports internal decision making

A structured document can make it easier for purchasing and finance teams to review a proposed expense and seek approval.

Makes advance payment discussions clearer

If payment is required before the order is completed, the buyer can see the proposed amount and payment conditions before making the payment.

Makes final invoicing easier

Once the customer confirms the transaction, the information already captured in the proforma invoice can be used while preparing the applicable final invoice.

How to Create a Proforma Invoice?

Creating a Proforma Invoice is straightforward when the proposed transaction is clearly structured.

1. Add Seller and Buyer Details

Start with the seller’s business name, address, contact details, and GSTIN where applicable. Then add the buyer’s name, address, contact details, and GSTIN where applicable.

2. Add the Proforma Invoice Details

Clearly label the document as PROFORMA INVOICE.

Include a reference number, issue date, and validity period where applicable. Keeping proforma invoice references separate from final invoice numbers can also help maintain clearer records.

3. List Products or Services

Add each proposed product or service separately.

Include the description, quantity, unit, price, and applicable HSN or SAC code where relevant. For services, the scope of work and agreed pricing can be described instead.

4. Add Taxes, Discounts, and Other Charges

Show applicable taxes, discounts, shipping charges, packaging charges, or other agreed costs separately where relevant.

This allows the buyer to understand how the estimated total has been calculated.

5. Mention Payment and Delivery Terms

Clearly state when and how the buyer is expected to pay. If an advance is required, mention the amount or percentage along with the balance of payment terms.

You can also include the expected delivery timeline and other conditions relevant to the proposed transaction.

6. Review and Share

Before sending the document, check the customer’s details, item descriptions, quantities, prices, taxes, and terms. Once reviewed, share the proforma invoice with the buyer for consideration and confirmation.

Common Proforma Invoice Examples

A proforma invoice can be prepared for different business situations.

Product orders: A supplier can share a proforma invoice when a buyer wants to review the complete cost before confirming an order.
Services: A service provider can use one to present the proposed scope, pricing, taxes, and payment schedule before work begins.
Advance orders: Businesses can use a proforma invoice to communicate the proposed amount when payment is expected before production or delivery.
International transactions: Sellers may use one to communicate proposed product and pricing details before completing the required commercial documentation.
Purchase approvals: Buyers can share the document internally to help procurement or finance teams review the proposed expense.

Are There Different Types of Proforma Invoices?

There are no universally defined legal categories of proforma invoices. Businesses may structure them differently depending on the type of transaction.

A product-based proforma invoice may focus on quantities, unit prices, taxes, and delivery charges. A service-based version may give more attention to the scope of work, project fee, or payment schedule.

For international transactions, additional information such as currency, product classification, origin, and shipping details may be included when relevant. The format should ultimately contain the information the buyer needs to understand the proposed transaction.

Keep the Transaction Clear Before It Begins

A Proforma Invoice gives both the buyer and seller a clear reference before a proposed transaction moves to the final billing stage.

By bringing together products or services, pricing, taxes, payment terms, and delivery details, it helps both parties understand what is being proposed and resolve questions before the order is finalized. It is not a replacement for the final tax invoice. Its value lies in what comes before that stage: giving the buyer a clear view of the proposed transaction and giving the seller a structured way to communicate its terms.