What is a proforma invoice?
A proforma invoice is a preliminary document issued by a seller to a prospective buyer before goods are delivered or services are completed. It outlines the estimated details and costs of a planned sale, giving both parties a clear understanding of what is expected before the transaction is finalised. Unlike a standard or tax invoice, a proforma invoice is not a legally binding request for payment and cannot be used for GST or income tax purposes.
The term “proforma” comes from the Latin for “as a matter of form,” reflecting its purpose as a good-faith estimate rather than a final bill.
What does a proforma invoice include?
A proforma invoice typically includes:
- The label “Pro Forma Invoice” clearly at the top
- Seller’s business name, address, and ABN
- Buyer’s name and address
- Date of issue
- Description of goods or services, including quantities
- Estimated price per unit and total cost
- Any applicable GST or taxes
- Optional payment terms or delivery timeline
Proforma invoice vs. standard invoice
The key difference between a proforma invoice and a standard invoice is timing and intent. A proforma invoice is sent before goods are delivered or work is completed, whereas a standard invoice is issued after the transaction is complete. Proforma figures are estimates and may change, while a standard invoice contains confirmed, final amounts.
When is a proforma invoice used?
Proforma invoices are commonly used in Australian business contexts to:
- Provide a formal quote to a customer before committing to a sale
- Assist with customs clearance when importing or exporting goods
- Help buyers apply for import licenses or arrange foreign currency transfers
- Set clear expectations around pricing and scope before a project begins