How to Create a Proforma Invoice — Step-by-Step Guide

What a proforma invoice actually is

A proforma invoice looks almost identical to a real invoice — same layout, same fields, same figures. But it carries one critical difference: it is not a demand for payment and has no legal standing as a debt instrument. It is an advance notice, a formal quote in invoice format, or a declaration of intent sent before the transaction is finalised.

The word "proforma" comes from Latin and means "as a matter of form" — in other words, this is what the invoice will look like. Think of it as a draft invoice that you send before the real one.

Because it is not a legal demand, a proforma invoice does not get posted to your accounts receivable or your client's accounts payable. It does not trigger a VAT or GST obligation in most jurisdictions. It is simply a document — useful, professional, and widely understood.

When to issue a proforma invoice

There are four main situations where a proforma invoice is the right document to send:

1. Before goods are manufactured or shipped

If you are a product business and a client wants to confirm an order before you begin production or shipping, send a proforma. It lets the client see exactly what they are committing to — unit prices, quantities, shipping costs, taxes — and approve it before you incur any costs. It is also used to secure a deposit: the client pays against the proforma, you fulfil the order, then you send the final commercial invoice.

2. Before the client has committed

Some clients, particularly in corporate environments, need a formal document in invoice format before they can raise an internal Purchase Order or get budget approval. They cannot approve payment based on a quote PDF — their procurement system requires something that looks like an invoice. A proforma invoice fills that gap. Once approved internally, they issue you a PO and you raise a real invoice.

3. For export and customs purposes

This is the most common use of proforma invoices in international trade. Customs authorities in the destination country need to know the commercial value of the goods being imported before they arrive. A proforma invoice provides that valuation — it tells customs what the goods are, what they are worth, where they came from, and the Incoterms agreed. The actual commercial invoice follows with the shipment. Many countries explicitly accept proforma invoices for customs pre-clearance and import licence applications.

4. When the final figures are not yet confirmed

If you are partway through a project and the scope is still being agreed, you might issue a proforma to show indicative costs while negotiations continue. This is common in construction, consulting, and manufacturing where final costs depend on decisions not yet made.

What a proforma invoice must include

The fields are nearly identical to a standard invoice, with two important additions:

• The word "PROFORMA" prominently displayed — this is what distinguishes it legally and practically from a real invoice. It must be visible and clear, usually in the invoice title.
• Your company details — name, address, contact information, and tax registration number if applicable
• Client details — name and address of the buyer
• Proforma invoice number — use a prefix like PRO- or P- to distinguish from real invoice numbers (e.g. PRO-001). Keep proforma and invoice number sequences separate.
• Issue date — the date the proforma was sent
• Validity period — how long the quoted prices are valid for (e.g. "This proforma is valid for 30 days from the date of issue"). Prices can change; protect yourself.
• Line items — description, quantity, unit price, and totals for each product or service
• Subtotal, tax, and total — clearly broken out, using the same methodology as your real invoices
• Currency — especially important in international trade where exchange rate risk matters
• For exports: country of origin, HS (Harmonized System) code for goods, Incoterms (e.g. EXW, FOB, CIF), and port of loading/destination
• Notes — payment terms, deposit requirements, lead times, or any conditions attached to the proforma

Step-by-step: creating a proforma invoice with GoWin Tools

GoWin's Proforma Invoice tool is free, runs in your browser, and requires no login. Here is the exact process:

Step 1 — Open the tool and set up your company profile

Click Company Profile and fill in your business details: company name, contact name, email, phone, address, and tax/VAT/GST number. This pre-fills your sender details on every proforma you create during the session.

Step 2 — Fill in the proforma header

The tool labels the document as a Proforma Invoice automatically — you do not need to add it yourself. Fill in:

• Proforma number — e.g. PRO-001. Start a fresh sequence separate from your invoices.
• Issue date — today's date
• Valid until — how long the quoted prices stand. 14–30 days is typical for most services; shorter if you are dealing with volatile material or currency costs.

Step 3 — Enter client details

Fill in your client's name, company, and address. For export proformas, the client address is important — customs authorities check that the buyer details match the shipping documents.

Step 4 — Add line items

Add each product or service as a separate line. Be precise with descriptions — for export proformas, customs officers read these descriptions and use them to classify goods. Vague descriptions like "goods" or "products" can cause shipments to be held at customs.

If you are exporting physical goods, include the quantity in the relevant unit (e.g. units, kg, metres) and the unit price. The total value is what customs will use to calculate import duties and taxes on the destination side.

Step 5 — Set the tax rate

Apply tax if applicable. Note that for many export transactions, goods are zero-rated for VAT or GST at point of export — the importer handles their own local taxes on arrival. Check the rules for your jurisdiction. If zero-rated, enter 0 in the tax field and note "Zero-rated export" in the notes section.

Step 6 — Add notes

Use the notes section to state:

• Payment terms (e.g. "50% deposit required before production, balance due before shipment")
• Lead time (e.g. "Estimated delivery: 4–6 weeks from receipt of deposit")
• Incoterms and port details for exports
• Country of origin if relevant
• A clear statement: "This is a proforma invoice only. It does not constitute a demand for payment." (optional but good practice)

Step 7 — Download and send

Click Download PDF. Review the PDF before sending — check that PROFORMA appears clearly in the title, all figures are correct, and the validity date is right. Send to your client by email. Keep a copy in your records.

What happens after you send a proforma invoice

Client approves — you proceed

The client reviews the proforma and either confirms or negotiates. Once confirmed (often with a deposit payment or a signed acceptance), you begin production, shipping, or work. When the transaction is complete, you issue a real commercial invoice for the final agreed amount. This is the one that goes into your accounting records and creates a payment obligation.

Following up with a real invoice

Always follow a proforma with a proper invoice once the goods or services have been delivered. Do not let a proforma serve as the final document — it has no legal standing as proof of a completed transaction. Your real invoice should reference the proforma number (e.g. "Re: Proforma PRO-001 dated 15 April 2025") so both documents are linked in your records and the client's records.

For export: keep both documents

When shipping internationally, you will typically submit the proforma to customs pre-clearance, then include the commercial invoice with the shipment documents. Keep both on file — customs audits can look back years, and having the full document trail protects you.

Common mistakes to avoid

• Forgetting to label it as PROFORMA — if it looks exactly like a real invoice without the label, your client may post it to their accounts payable and expect it to be paid, causing confusion.
• Using the same number sequence as real invoices — keep proforma numbers in a separate sequence to avoid gaps in your invoice records.
• Not including a validity date — prices change. Without a validity date, a client could come back six months later expecting the quoted price to still apply.
• Never following up with a real invoice — a proforma is not a substitute for a proper invoice. Always follow up with a commercial invoice once the transaction completes.
• Treating a proforma payment as income without issuing a real invoice — deposits paid against a proforma still need to be followed by a real invoice for your accounting to be correct.