A proforma invoice is an invoice issued before a sale to inform the buyer regarding the goods or services, prices, taxes, and terms of delivery. It does not mean that you’re legally asking for payment. It’s more like a commitment to supply which is sent for approval or confirmation.
In simple terms, if you are still confused about what is meant by a proforma invoice — it’s a pre-sale invoice that gives you an overview of the deal before the actual billing.
A proforma invoice format is a ready-to-use template that includes all necessary fields like seller and buyer details, item list, quantity, price, tax estimate, total amount, and payment terms. The format can different depending on your industry and region but the core structure remains the same.
| Point of Difference | Proforma Invoice | Invoice |
|---|---|---|
| Purpose | Shared before sale for approval | Issued after sale, simply asking for payment |
| Legal Validity | Not legally binding | Legally valid document for payment and taxes |
| Tax Credit (Input) | Cannot be used to claim tax credit | Can be used to claim tax credit |
| Changes Allowed | Can be edited or canceled | Cannot be changed or canceled |
| Point of Comparison | Proforma Invoice | Quotation |
|---|---|---|
| Purpose | Shared before a sale to confirm order, pricing, and terms | Sent to offer a price estimate before order is placed |
| Level of Detail | Includes detailed info – item list, price, tax, delivery | Only basic pricing and item/service details |
| Legal Value | Not legally binding, but more formal than a quote | Not legally binding, initial offer only |
| When It Is Used | Before generating a final invoice | At the very beginning of the buying process |
| Includes Taxes | Yes, includes estimated GST/VAT/customs | No, unless specified |
| Used For | Advance payments, export, order approvals | Price comparison, negotiation |
| Professional Impression | Acts as a draft invoice, more formal | Less formal, initial communication |
| Conversion Possibility | Can be converted into a tax invoice | Not typically converted into an invoice |
You can use a proforma invoice in many business scenarios:
In such cases, businesses often compare proforma invoice vs quotation or even difference between quotation and proforma invoice, with the key difference being that a quotation only gives pricing, while a proforma includes detailed terms, taxes, and totals.
Creating a proforma invoice is simple if you follow these steps:
Include full business name, GST or tax number, address, and contact info.
Mention item description, HSN/SAC code, quantity, unit price, and total amount.
Add estimated GST or other taxes, delivery timelines, validity, and payment terms.
Add proforma invoice terms and conditions, bank details (if required), and an optional note about the invoice not being a payment demand.
Save as Excel, PDF, or Word—depending on your format. You can also use apps like a proforma invoice app or proforma invoice maker for automatic emailing and tracking.
If you're using software like Tally, you can also learn how to create proforma invoice in Tally using optional vouchers.
