what is a pro forma invoice 
a pro forma invoice is actually not an invoice it is a preliminary bill of sale sent to buyers when an order is placed and in advance of a shipment or delivery of goods it will typically describe the purchased items price and other important information such as the shipping weight and transport charges understanding pro forma invoicesa pro forma invoice is different from a simple price quotation in that it lays out the terms of a transaction however the terms are subject to change it represents a good faith estimate that s used to inform the buyer and prevent misunderstandings about any unexpected or significant charges once the transaction is final businesses in virtually all industries use pro forma invoices to satisfy their internal purchase approval process pro forma invoices streamline the sales process by limiting additional back and forth after a transaction is intiated as all terms have been defined upfront most pro forma invoices provide the buyer with a precise sale price they include an estimate of any commissions or fees such as applicable taxes and shipping costs a firm may send a pro forma invoice before shipping any agreed upon deliverables or with the shipped items it contains cost details associated with the sale but is not an official demand for payment no guidelines dictate the exact presentation or format of a pro forma invoice and it may or may not resemble actual commercial invoices 1pro forma invoices often come into play with international transactions especially for customs purposes relating to duties on imports purpose of a pro forma invoicea pro forma invoice is used by a seller to communicate to a buyer the expected costs fees and date of delivery for an order this transparency can help the manufacturer avoid any misunderstandings when the order is delivered the pro forma invoice represents an estimate of the costs that the buying party should expect to pay a pro forma invoice also provides the buyer with an opportunity to negotiate the terms before delivery for example if the buyer is not satisfied with the price quantity or delivery timeline they can contact the manufacturer to reach a mutually satisfactory conclusion pro forma invoices aren t legally required but they re generally a good idea because they can prevent disputes at the time of delivery 2pro forma informationspecific documentation is required before goods can pass through customs into the u s a traditional commercial invoice must list substantial information such as the buyer and the seller a description of the goods the quantity the value for all the shipped items and the location of the purchase the method of payment currency carrier and more 3a pro forma invoice isn t needed for international shipments but is often used when a transaction that isn t final requires an estimate of the cost of products being bought it should include enough information to allow customs to determine the duties needed from a general examination of the included goods this information can include 3if a firm uses a pro forma invoice for customs it must also present a commercial invoice within 120 days 4a pro forma invoice should include all the details of a transaction even if certain figures aren t yet final so that nothing comes as a surprise to the buyer depending on the type of business a pro forma invoice can include pro forma means for the sake of form it s used to announce that the information within a document is based on projections and isn t final 2pro forma invoice vs final invoicewhile a pro forma invoice represents a preliminary notification of the terms of a purchase agreement a formal final invoice is an official commercial instrument that informs the receiving party of their payment obligation a formal invoice is usually issued at the time of delivery and constitutes a request for payment by the receiving party unlike an official invoice a pro forma invoice is simply used to prevent misunderstandings about the specifics of a transaction such as the amount due it is usually issued at the time an order is placed so that the buyer can clarify any questions about the price or date of delivery 5pro forma invoice examplea firm may use a pro forma invoice if the terms of the sales contract specify that full payment is not due until the buyer receives certain goods for example a bakery customer might agree to the price of a cake on a pro forma invoice and the baker will deliver the cake once it is ready the customer will then pay for it when they receive the final formal invoice the final invoice amount should be the same or close to the amount on the pro forma invoice 