A Proforma Invoice (PI) is a preliminary bill of sale that is sent to a customer before the final details of the sale are confirmed. It serves as a good-faith agreement between the buyer and seller, outlining the goods or services to be provided, their prices, and other important details such as shipping costs and taxes.

The purpose of a proforma invoice is to avoid any unexpected charges or duties and to provide a clear understanding of the sale before it is finalized.

A PI is not legally binding and does not require a unique invoice number. Typically, businesses use proforma invoices for sales that have not yet been completed, allowing for terms to be negotiated and changed. Unlike a standard invoice, a proforma invoice does not include a means of payment and should not be recorded in accounting records.

Structure of a Proforma Invoice

The P/I structure is similar to a standard Commercial Invoice. That’s why it should be clearly labeled as “Proforma” to distinguish it from other sales documents. It should include details about the issuing and validity dates, specification of goods, or declaration of services. It also shall consist of unit and total prices and terms of delivery, applicable taxes, and shipping costs.

Buyers often use proforma invoices in international trade to apply for import licenses or arrange pre-shipment inspections. They can also be used in domestic sales to provide a clear understanding of the sale before it is finalized.

Sources

You can find the full guidelines on drafting a Proforma Invoice on the ICC website:

• International Chamber of Commerce (ICC). (n.d.). Proforma Invoice.

For more guidelines on drafting a P/I, you may also refer to other reputable organizations such as:

the World Trade Organization (WTO) or the United Nations Conference on Trade and Development (UNCTAD). etc