Pro Forma Invoice
Definition
A preliminary invoice sent before goods or services are delivered, providing an estimate of costs.
Overview
A pro forma invoice is a preliminary bill that serves as a quote or estimate. Unlike standard invoices, pro forma invoices don't affect accounting records and are commonly used in international trade or when clients require cost approval before work begins.
Example
An exporter sends a pro forma invoice showing $10,000 for 100 units, helping the client arrange financing and customs clearance before shipment.
Best Practices
Use pro forma invoices when clients need cost estimates for budgeting, international shipments require customs documentation, or you need approval before starting work.
Common Mistakes to Avoid
Using pro forma invoices as actual payment requests
Not following up with a final invoice
Including incorrect terms or pricing
Frequently Asked Questions
Is a pro forma invoice legally binding?
No, a pro forma invoice is not a legally binding demand for payment. It's an estimate that must be followed by a final invoice.