Definition
A proforma invoice is a preliminary bill that shows a buyer what they will be charged before goods are shipped or a final invoice is issued.
What is a proforma invoice used for?
A proforma invoice looks like an invoice, but it isn’t a demand for payment and isn’t recorded as a sale or as tax due. Buyers use proforma invoices to arrange advance payments, letters of credit or import permits, and some customers ask for one before releasing a deposit.
Example: an importer asks for a proforma invoice for USD 32,000 of pumps so its bank can open a letter of credit; the tax invoice follows on shipment.
It’s often confused with a quotation. A quotation offers a price; a proforma invoice sets out the expected bill for an order the buyer intends to place.