A Proforma Invoice (For product/Service supply) is a preliminary commercial document that a seller issues to a buyer before shipping goods or delivering services. It functions as a formal quotation that outlines the expected terms of a transaction. Sellers use a P/I to present a clear offer, while buyers rely on it to evaluate costs and confirm purchase intent before committing to a final contract or payment.

Unlike a commercial invoice, a proforma invoice does not demand payment and does not create a legally binding obligation. Instead, it provides transparency at an early stage of the transaction and helps both parties align on commercial expectations.

Purpose and Practical Role of a Proforma Invoice

The primary purpose of a P/I is to clarify pricing and transaction structure before execution. It allows the buyer to review the scope of supply, estimated costs, and delivery conditions in advance. As a result, it reduces uncertainty and prevents disputes once the transaction progresses.

In international trade, buyers often use proforma invoices to arrange financing, apply for import licenses, or complete customs and regulatory documentation. Sellers benefit by setting clear terms that guide subsequent negotiations and support internal approvals before issuing a commercial invoice.

Information Included in a Proforma Invoice

A well-prepared proforma invoice typically includes:

• Description of the products or services
• Quantity and unit price
• Total estimated value
• Delivery and shipping terms (such as Incoterms)
• Payment terms and currency
• Estimated taxes, duties, or charges
• Validity period of the offer

By presenting this information clearly, the seller ensures that the buyer understands the commercial framework of the proposed transaction.

Use in Order Confirmation and Payment Preparation

Buyers often rely on a P/I to confirm their order internally. It supports budgeting, approval workflows, and payment planning. In some cases, banks or financial institutions request a proforma invoice before processing advance payments or issuing trade finance instruments.

From the seller’s perspective, the document formalizes the offer and demonstrates readiness to proceed once the buyer accepts the terms.

Difference Between a Proforma Invoice and a Commercial Invoice

A proforma invoice differs fundamentally from a commercial invoice. A commercial invoice reflects a completed sale and supports payment, accounting, and customs clearance. In contrast, a proforma invoice serves as an estimate and negotiation tool.

Because it does not represent a finalized transaction, a proforma invoice does not trigger payment obligations or accounting entries. Parties may revise or cancel it without legal consequence until they issue a commercial invoice or sign a binding agreement.

Final Note

A P/I plays a critical role in structuring product and service supply transactions. It promotes transparency, supports informed decision-making, and aligns expectations before execution. When prepared accurately, it helps buyers confirm orders confidently and enables sellers to move efficiently toward final documentation and delivery.

Check out more pages of our website for related content:

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• Commercial Invoice
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• Project Proforma Invoice
• Proforma Invoice (PI)

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Reference:

• Investopedia – What Is a Pro Forma Invoice? Required Information
• The US International Trade Administration –Pro Forma Invoice …