What is a proforma invoice?

A proforma invoice is a preview of an invoice, sent before a sale is final. It lists what you will supply, the prices, tax, delivery details and payment terms, laid out like a normal invoice. So what is a proforma invoice for? It lets the buyer see exactly what they will be billed so they can approve the purchase, pay in advance or arrange paperwork such as an import permit, before you deliver.

The Latin pro forma means “as a matter of form”. The document looks like a bill, but it is not a request for payment in the legal or accounting sense, and it does not go in your books as a sale.

What is a proforma invoice used for?

• Payment in advance. A new customer pays upfront before you start. The proforma tells them exactly what to pay.
• Internal approval. A client’s finance team needs a document with full details to raise a purchase order or release budget.
• Imports and exports. Buyers of goods from another country often need a proforma to apply for import licences, arrange letters of credit or estimate customs duty.
• Confirming details. For large or complicated orders, both sides can check quantities, prices and delivery before anything ships.

Proforma invoice vs invoice vs quote

A quote says “this is what it would cost”. A proforma says “this is exactly what you will be billed for this agreed order”. The invoice is the real bill.

How a proforma invoice works: an example

Adaeze makes handmade leather bags in Abuja. A boutique in London orders 40 bags at $85 each. Because it is a new overseas customer, she asks for 50% upfront. She sends a proforma invoice showing:

• 40 leather tote bags at $85 = $3,400
• Shipping by courier: $220
• Total: $3,620
• Deposit due now: $1,810; balance due before shipping
• Estimated shipping date and delivery terms
• “Proforma invoice: this is not a tax invoice”

The boutique uses it to get approval and to check likely import charges, then pays the deposit. When the bags are ready, Adaeze issues the real invoice with its own invoice number and records the sale.

When you do not need one

For most local service work paid after delivery, a proforma adds a step without adding much. Send a clear quote, agree it, do the work and send the invoice. Proformas earn their place when money must move before you deliver, when a client’s internal process needs a document to approve spending, or when goods cross a border. If you take deposits regularly, a simple deposit payment request alongside the quote is often enough.

What to put on a proforma invoice

• The words “Proforma invoice” clearly at the top.
• Your details and the buyer’s.
• A reference number (separate from your invoice numbering) and date.
• Description, quantity and price of each item or service.
• Tax, shipping and the total, with the currency.
• Payment terms, including any deposit, and how to pay.
• For goods crossing borders: weights, country of origin and product codes the buyer’s customs agent may need.
• How long the offer is valid.

Common mistakes

• Treating a proforma as a sale. Do not count it as revenue or add it to accounts receivable until you issue the real invoice.
• Using your invoice numbers. Give proformas their own numbering so your invoice sequence has no gaps.
• Forgetting the real invoice. Once paid or delivered, send the proper invoice. Your customer may need it to reclaim tax.
• Changing prices between proforma and invoice without warning. If something changes, tell the buyer first.

This is general information, not tax advice. Tax bodies such as HMRC, the IRS or the Nigeria Revenue Service set the rules for tax invoices where you are.

Proforma invoices in startbuddi

There is no separate “proforma invoice” document type in startbuddi. The closest fit is an estimate: in Money Manager, open Get Paid and then Estimates, add the client and line items with tax and discount, and put “Proforma invoice: this is not a tax invoice” and your deposit terms in the notes. Send it by email; when the customer agrees, mark it accepted and convert it to a real invoice with the same line items.

To collect a deposit before the invoice, create a payment link for the deposit amount from Get Paid and send it with the estimate. Your next step: set up a separate numbering scheme for proformas (for example PF-001) so they never mix with your invoices.