Pro Forma Invoice
A pro forma invoice is a preliminary commercial document describing the proposed goods, price, currency and terms before the final invoice is issued. It is commonly used to support quotations, deposits, approvals and import preparations.
A pro forma invoice is a quotation dressed as an invoice. It sets out what the supplier proposes to sell, the quantities, unit prices, currency, delivery terms such as an Incoterm, the payment terms and usually the bank account for payment. In China sourcing it is often the document a factory issues once the buyer accepts a quote, and it frequently serves as the basis for the production deposit before any goods exist.
Because it precedes the transaction, a pro forma invoice is not a demand for payment of goods already supplied and is not the document customs uses to clear goods. Banks and payment providers nonetheless accept it as supporting evidence for an advance payment, alongside a purchase order or contract. When the goods ship, the supplier issues a commercial invoice, and the two should reconcile: the same parties, goods, prices and currency, with the deposit credited against the final amount.
Some buyers use a pro forma invoice to support an import license, a letter of credit application or internal budget approval. Its usefulness depends on its accuracy. A pro forma that names one company while the bank details belong to another, or that changes prices between versions without explanation, is a warning sign. Keep every version, because a reviewer may later compare the pro forma, the commercial invoice and the payments made.
In practice
A pro forma invoice supports a deposit but does not prove that goods were supplied. Expect a bank to ask for the final commercial invoice and shipping evidence later, and make sure the documents agree.
Example
Hypothetically, a furniture retailer accepts a quote for 200 dining tables at US$150 each, FOB Ningbo. The factory issues a pro forma invoice for US$30,000 requesting a 30% deposit of US$9,000. The retailer's bank processes the deposit with the pro forma and purchase order attached; at shipment the factory issues a commercial invoice for US$30,000 showing the deposit received and US$21,000 due.
Commonly confused with
| Term | How it differs |
|---|---|
| Commercial invoice | A pro forma invoice describes a proposed sale before it happens. A commercial invoice records the actual sale and the amount owed once the goods are supplied. |
See also
- Commercial InvoiceA commercial invoice is the seller’s formal statement of the goods or services supplied and the amount owed by the buyer. Banks, customs authorities and payment providers may use it to verify the payment amount, parties, currency and commercial purpose.
- Cash in AdvanceCash in advance requires the buyer to pay before the seller ships or releases the goods. It protects the supplier against nonpayment but gives the buyer less protection if the goods are late, defective or never delivered.
- Supplier-Payment TermsSupplier-payment terms define when and under what conditions a buyer must pay a supplier. They may include deposits, production milestones, inspection requirements, shipment events, credit periods and final-balance deadlines.
- IncotermsIncoterms are standardized trade terms published by the International Chamber of Commerce that allocate specified delivery responsibilities, costs and risks between buyer and seller. They do not by themselves determine ownership, payment method or every contractual obligation.