Proforma invoice: what it is, what it's for, and how to create one

A proforma invoice is a commercial document used as a proposal or estimate before formalizing a sale. Although it resembles a standard invoice, it has no tax or accounting validity. However, it is very useful in international trade and business negotiations.

What is a proforma invoice

A proforma invoice is a preliminary document that the seller sends to the buyer before the delivery of goods or the provision of services. It details the products, prices, terms of sale, and other aspects of the transaction, but it has no accounting or tax value.

It represents a commitment by the seller to maintain the stated conditions for a specified period of time, allowing the buyer to make an informed decision.

What is a proforma invoice used for

Proforma invoices are used in various situations:

• International trade: so the buyer can process import licenses, open documentary credits, or manage customs clearance.
• Formal quotations: when a client requests a detailed offer before confirming an order.
• Financing requests: the buyer can present it to banks to obtain financing.
• Sending samples: to accompany goods sent without commercial charge.
• Intra-community transactions: as a supporting document prior to the issuance of the final invoice.

Differences between a proforma invoice and a commercial invoice

What data should a proforma invoice include

Although it is not a tax document, a professional proforma invoice should contain:

• Clear indication of "PROFORMA": so it is not confused with a standard invoice.
• Issuer's details: name, address, and NIF/CIF.
• Recipient's details: name, address, and NIF/CIF.
• Date of issue and offer validity date.
• Detailed description of the products or services.
• Unit prices and total: including any applicable discounts.
• Payment terms: proposed payment method and deadline.
• Delivery terms: delivery deadlines, Incoterms (in international trade).
• Currency: especially important in international transactions.

How to create a proforma invoice step by step

1. Identify the document as a proforma

Visibly include the word "PROFORMA" or "PROFORMA INVOICE" in the document header to avoid confusion.

2. Include both parties' details

Add the complete details of the seller and buyer, just as in a standard invoice.

3. Describe the products or services

Detail precisely what is being offered: quantities, characteristics, unit prices, and any special conditions.

4. Establish the commercial terms

Specify the payment method, delivery deadlines, offer validity, and, if it is an international transaction, the applicable Incoterms.

5. Add a validity date

Indicate until when the offered conditions will be maintained. This protects the seller against price fluctuations or market changes.

When does it become a final invoice

Once the buyer accepts the proforma conditions and the transaction is formalized, the seller must issue the final commercial invoice. This invoice will have tax validity, will be included in accounting records, and must comply with all legal requirements.

Common mistakes with proforma invoices

• Not clearly indicating that it is a proforma.
• Including it in the official invoice numbering.
• Using it as a tax or accounting receipt.
• Not setting a validity date for the offer.

Manage your proformas with Holded

With Holded, you can create professional proforma invoices in seconds, convert them into final invoices with one click, and maintain complete tracking of your commercial proposals. Everything is integrated with your accounting and CRM.