Business paperwork is never anyone’s favourite part of the job. But some documents are more useful than they seem at first glance. Pro forma invoices are one of those.
They look like invoices but they are not quite the same. And if you are running a business in the UK, especially in 2025 when digital processes are everywhere, understanding how and when to use pro forma invoices can save you time and hassle.
In this guide, you’ll get to know:
- What Is a Pro Forma Invoice
- When Is a Pro Forma Invoice Used
- How To Create a Pro Forma Invoice
- And Much More..
Let’s get into it!
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What Is a Pro Forma Invoice?
A pro forma invoice is basically a draft invoice. It is a document you send to a customer before you deliver goods or services. It shows what you plan to supply, how much it will cost and any other details like delivery charges or VAT.
But it is not a demand for payment and It is not legally binding. It is more like a polite heads-up.
Why Is It Called Pro Forma?
The phrase pro forma is Latin for “for the sake of form“. That’s exactly what it is! A formality. A way to show what’s coming, without making it official just yet.
How Is a Pro Forma Invoice Different From Other Documents?
There are several documents in business that might look similar: quotes, standard invoices (tax invoices/commercial invoices), purchase orders.
Here’s how a pro forma invoice differs:
Pro Forma Invoice Vs Quote
- A quote is generally an early estimate of cost. It is given before the buyer has committed. It may list services/goods and price. But it often lacks formal terms and may still change significantly.
- A pro forma invoice is sent later. The buyer may have committed (or be close to committing) but the transaction hasn’t been completed. The details are much more defined. It is a more detailed document that functions as a near-final draft of the sale.
Pro Forma Invoice vs. Standard (Final) Invoice
- A pro forma invoice is a preliminary bill sent to a customer before the delivery of goods or services. It provides an estimate of costs and confirms the seller’s commitment to the transaction. But it is not a legal or binding request for payment.
- A standard invoice is a legally binding request for payment sent after the goods have been delivered or the service has been completed. It is a formal accounting document and is used to officially collect money and reconcile accounts.
Pro Forma Invoice vs. Commercial Invoice
- A pro forma invoice, as you now know, is an initial bill sent to a buyer that outlines the estimated costs for goods or services before delivery. It is not legally binding.
- A commercial invoice is a legally binding document used for international shipments after the sale is finalised and goods are delivered. It is a mandatory customs document that details the final value of the shipment for calculating duties and taxes.
Pro Forma Invoice vs. Purchase Order (PO)
- A pro forma invoice, as discussed above, is sent from the seller to the buyer to outline the proposed terms of sale. It is not a legally binding document.
- A purchase order (PO) is a legally binding document sent from the buyer to the seller to formally authorize a purchase. It confirms the buyer’s commitment and creates a contractual agreement.
Quick Comparison Table: Pro Forma Invoice vs Regular Invoice
Let’s clear up the confusion. They look similar but they’re used differently.
| FEATURE | PRO FORMA INVOICE | REGULAR INVOICE |
| Legally binding? | No | Yes |
| Used for payment? | No | Yes |
| Goes in accounting? | No | Yes |
| Sent before delivery? | Yes | Usually after delivery |
| Includes VAT? | Optional | Required if VAT registered |
What Is the Purpose of a Pro Forma Invoice?
A pro forma invoice has one main goal: clarity before commitment. In other words, the main purpose of issuing a pro forma invoice is to establish clarity and mutual commitment between the seller and the buyer before the transaction is finalised and goods are delivered.
Pro forma invoice prevents miscommunication and ensures a smooth transition to the final sale.
It is particularly useful for:
- Preventing surprises: It spells out all the costs, including shipping and taxes, so there are no surprises when the final bill arrives.
- Smoothing out workflows: It gives the customer all the information they need for their own internal processes, like getting approval from their purchasing department.
Pro Forma Invoice Example
Let’s say you run a custom furniture business. A customer, let’s call her Jane, wants a walnut dining table. After you finalise the design and price, she is ready to move forward. You’d send her a pro forma invoice. It looks similar to a final bill but it is clearly marked “Pro Forma.”
This document would spell out:
- Your contact details and Jane’s.
- A description: “One custom 6-seater dining table, solid American walnut.”
- The agreed-upon price: £2,500.
- The estimated shipping costs: £100.
- The projected delivery date: “6–8 weeks.”
- And importantly, a note saying this is not a VAT invoice.
Jane can then use this document to get approval from her accountant or arrange for a bank loan. Once the table is delivered and the final sale is settled, you’ll send her the official, legally binding invoice.
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What A Pro Forma Invoice Should Look Like?
Visually, the pro forma invoice should look like an invoice but contain enough cues to make it clear that it’s not final. it must say “Pro Forma Invoice”.
Example layout:
Common Reasons For Issuing A Pro Forma Invoice
Businesses issue a pro forma invoice in specific situations to simplify a sales transaction.
- International shipping: When goods cross borders, a pro forma invoice is a must-have for customs. It helps them declare the value and calculate duties quickly, which helps avoid shipping delays.
- Securing advance payment: If you need a deposit from a new client or for a big custom order, a pro forma invoice makes that request official before you get started.
- Helping the buyer budget: Some customers, especially larger companies, need a pro forma invoice to get their internal budget and accounting sorted out before they can send you a formal purchase order.
- Allowing for flexible negotiations: Since it’s not legally binding, a pro forma is a handy negotiation tool. If anything about the order changes, it’s a lot easier to tweak the pro forma invoice than it is to cancel and redo a final invoice.
When Should You Send A Pro Forma Invoice?
So, when’s the right time to send a pro forma invoice? You should send it after your customer has said ‘yes’ to a purchase but before you’ve actually finished the deal and delivered the goods.
You’ll typically send a proforma invoice in these situations:
- When your quote gets the green light. The pro forma adds a nice, professional layer of detail without being a final demand for payment.
- Just before you ship out the goods. It’s a great way to give your customer a heads-up on exactly what they’ll be getting, including delivery dates and final costs.
- When your client needs internal approval. Many bigger companies can’t issue a purchase order until they have a pro forma to show their finance department.
- If the customer asks for it. Sometimes, a customer needs a pro forma for their own budgeting or to get financing lined up.
- To formalise a project that’s still a bit fuzzy. For custom jobs, or when you need a deposit upfront, the pro forma makes the agreement official without it needing to go into your books just yet.
How to Create a Pro Forma Invoice?
Here’s how you can create a pro forma invoice:
- Start with your business details
Include your business name, address, contact info, and VAT number if registered. - Add your client’s information
Mention their business name, address, and contact details. - Include a clear title
Write “Pro Forma Invoice” at the top so it’s obvious that this isn’t a final invoice. - Add a reference number and date
You can use a unique number (like PFI001) and the issue date for record-keeping. - List the goods or services
Include item descriptions, quantities, and prices. Be as clear as possible. - Show totals
Add up the total cost, taxes (if applicable), and any delivery charges. - Include payment and delivery terms
Mention things like “payment due after confirmation” or “prices valid for 30 days.” - Add a disclaimer
Something like “This is not a tax invoice” or “Issued for quotation purposes only.”
If you trade internationally, you might also include:
- Incoterms (like FOB, CIF, etc.)
- Currency used
- Estimated shipping date
- Country of origin of goods
You can create pro forma invoices easily in Word, Excel or Google Docs. You can also create it using invoicing software like Xero, QuickBooks, or FreeAgent.
How to Issue Pro Forma Invoices?
After creating the pro forma invoice, the next step is sending it to your client. As we discussed above, you should issue a pro forma invoice before supplying goods or services. It gives your client a chance to look everything over and give it their approval before you go ahead with the deal.
Typically, the process looks something like this:
- The buyer asks for a quote or an estimate.
- You create and send them a pro forma invoice that lays out the prices and terms.
- The buyer looks at it and confirms they are happy to proceed.
- You deliver the goods or services.
- Finally, you send them the official tax invoice so they can pay you.
You can easily send a pro forma invoice as a PDF via email or through your invoicing software. It is always a good idea to keep a copy for your records, especially if you are dealing with international trade.
Is A Pro Forma Invoice Legally Binding?
No, a pro forma invoice is not legally binding in the UK (or anywhere else). It doesn’t create a legal obligation to pay or deliver goods. Instead, it’s more like a formal quotation or offer.
Can a Seller Cancel a Pro Forma Invoice?
Yes, absolutely. Since a pro forma invoice is not legally binding, a seller can cancel or update it any time before the final invoice is issued.
For example:
- If prices change before the buyer confirms
- If stock availability changes
- If there’s an update in tax or shipping costs
In such cases, the seller simply issues a revised pro forma invoice with updated details.
Once the buyer accepts the final terms and the commercial invoice is issued, that is when the agreement becomes formal. Until then a pro forma invoice is just an offer. Not an obligation!
Can a Pro Forma Invoice Be Used to Account for VAT?
No, a pro forma invoice cannot be used to account for VAT in the UK. HMRC is very clear on this. A pro forma invoice is not a tax invoice and should not include VAT that’s officially recorded or claimed.
Risks Associated with Pro Forma Invoices
While pro forma invoices are useful for sharing quotes and price details, HMRC advises businesses to use them carefully. Misunderstanding their purpose can lead to VAT and record keeping problems.
Here are the most common risks associated with Pro Forma Invoices:
1. Claiming VAT on a Pro Forma Invoice
Some customers mistakenly use a pro forma invoice to claim input VAT. HMRC doesn’t allow this because a pro forma invoice is not a valid tax invoice. VAT can only be claimed once a proper VAT invoice is issued.
2. Double VAT Claims
There are cases where customers claim VAT twice. Once using the pro forma invoice and again when they receive the final invoice. This creates errors in VAT returns. And it may trigger compliance checks or penalties.
3. Supplier Failing to Issue a VAT Invoice
Sometimes suppliers assume that a pro forma invoice is enough once the goods or services are supplied. But it’s not. If a sale goes ahead, the supplier must issue an official VAT invoice to record the transaction properly.
4. Using the Wrong Tax Point
Another risk associated with the pro forma invoices is setting the wrong tax point. For example, treating the date of the pro forma invoice as the tax point. But it should actually be the date of payment or delivery. This can cause VAT reporting errors and lead to discrepancies during audits.
5. Inaccurate Accounting Records
Since pro forma invoices look like real invoices. Hence, some traders accidentally record them in their accounts. HMRC warns that this can cause confusion and inaccurate financial reporting.
To avoid these issues:
- Never record pro forma invoices as actual sales.
- Don’t use them for VAT claims or reporting.
- Always replace them with a proper VAT invoice once the sale is confirmed.
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The Bottom Line
Pro forma invoices are a smart way to keep things clear before a sale is final. They help you manage expectations and handle customs smoothly.
They are not official invoices. They don’t go in your books. But they’re still a useful tool!
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If this feels a bit much, we can sort it out. At Accotax, we help small businesses with clear invoicing advice, VAT queries and bookkeeping so you can spend less time on paperwork and more time on your business. We offer a range of packages designed to fit your unique needs!
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Disclaimer: The information about What Is A Pro Forma Invoice And How Can It Be Used? is provided in this article including text and graphics. It does not intend to disregard any of the professional advice.