Pro Forma Invoice

A pro forma invoice is a preliminary document sent to a customer before goods are delivered or work is completed. It states the expected price, quantities, and payment terms, and is typically used to request advance payment before the business commits to materials or production. Unlike a tax invoice, a pro forma does not record a completed transaction and does not create a formal payment obligation in the accounts. It is a good-faith statement of what the customer will be charged.

When to Use a Pro Forma Invoice

Pro forma invoices serve three main purposes in project-based businesses. The first is requesting a deposit before ordering materials or starting work - particularly important in promotional merchandise, where blank goods are ordered to customer specification, or in construction, where materials are purchased specifically for a job. Sending a pro forma with a clear payment deadline establishes the deposit expectation in writing before the business takes on any cost.

The second use is for international transactions. Customs authorities in many countries require a pro forma invoice to clear goods before the commercial invoice is issued. For businesses shipping branded merchandise or equipment internationally, a pro forma showing value, country of origin, and product description simplifies the clearance process.

The third use is for confirming an order before final pricing is locked. A furniture dealer quoting a large office fit-out may send a pro forma covering confirmed product selections and pricing, allowing the customer to raise an internal purchase order before the final invoice is issued at delivery. This is particularly useful in corporate procurement environments where a customer needs a formal document to authorize payment before goods arrive.

Pro Forma Invoice vs. Final Invoice

The distinction matters for accounting and tax purposes. A pro forma does not appear in accounts receivable as an outstanding balance in the same way a tax invoice does. When a customer pays against a pro forma, that payment is recorded as a deposit or advance payment, held against the job until the final invoice is raised.

When the job is complete and goods are delivered, the final invoice is issued. If a deposit was taken against a pro forma, the final invoice should show the deposit as a line item deduction: "Deposit received (pro forma ref PF-001): -$500." This keeps the invoice clear and the accounts accurate. Businesses using Zigaflow can raise deposit invoices linked to a specific job, ensuring that the deposit is tracked against the order and deducted from the final invoice when it is raised.