In the business world, there are numerous business documents, each with a well-defined role. Among them, the pro forma invoice is often used but still poorly understood. A provisional document, it is frequently confused with a quotation or a final invoice, although it has a very specific function.
Halfway between commercial offer and administrative information, the pro forma invoice is commonly used in professional exchanges, especially in international trade. However, her legal value is very different from that of a conventional invoice. In this article, we'll look at what a pro forma invoice is for, what it contains, when to use it, and what the law says about it.
A pro forma invoice is a document provisional and non-binding which presents a simulation of an invoice. It is established by a supplier before the final sale of goods or services, in order to provide a customer with a clear and detailed estimate.
Contrary to what its name might suggest, it is not Nor a quotation, nor of a legal bill. Its purpose is not to request payment, but simply tonotify. It makes it possible to anticipate the conditions of a future purchase: products concerned, quantities, prices, deadlines, ancillary costs, etc.
It is frequently found in B2B commercial relationships, but also in administrative or customs procedures. Its flexibility and ease of creation make it a popular tool, provided you know its limits.
The pro forma invoice has several practical uses in business life. Here are the main situations in which it is used:
The pro forma invoice is primarily used to explain in detail a commercial proposal. It can be sent to a prospect or to a regular customer to present an offer before placing an order. It's a kind of Invoice simulation which allows the customer to have a complete vision of future elements: product references, quantities, possible discounts, shipping costs, applicable taxes, etc.
It also allows the customer to validate a budget internally (in the case of a company) before agreeing. This makes exchanges more fluid and avoids surprises.
In some cases, the pro forma invoice is used for justify a future expense with a bank, a credit institution, or as part of administrative procedures. For example, a business may use it to obtain a loan to finance a specific purchase, or an international customer may need it to obtain a commercial visa Or a import authorization.
Customs services, in particular, may require a pro forma invoice for anticipate customs duties and taxes to be collected on an international shipment.
Some businesses use the pro forma invoice as basis for negotiation. It makes it possible to define a pricing framework, without definitively engaging the parties. This leaves the possibility of adjusting the terms of the offer before it becomes contractual via an order or a final invoice.
The pro forma invoice did not no legal or fiscal value. It does not constitute Nor a contract, nor a proof of transaction, Nor an accounting document. It cannot be recorded in accounting, does not trigger any cash receipts, and should not be used to declare VAT.
It is therefore important to understand that, legally, a pro forma invoice is a simple informative document, in the same way as a quotation. It does not commit the seller to provide the products or services, and does not require the customer to buy them. That said, if it is accompanied by general terms and conditions of sale and signed by both parties, it can acquire a certain contractual value, especially in the event of a dispute.
⚠️ To avoid confusion, it is strongly recommended that you clearly mention” PRO FORMA INVOICE ” on the document, in visible letters, and not to assign it an official invoice number.
Many professionals confuse pro forma invoices with traditional invoices. However, these two documents did not Not the same status, nor the same function.
The final bill is a legal document, required for any sale concluded. It is used to claim payment, it must include a unique number, an issue date, information from the seller and the buyer, as well as all mandatory legal information. It has legal, accounting and fiscal value. It is subject to VAT (if applicable) and must be archived.
As for the pro forma invoice, does not trigger any obligations, neither for the customer, nor for the supplier. It cannot be collected or recorded, and cannot be used as proof in the event of a tax audit.
Even if the law does not set out mandatory information for a pro forma invoice, some information is essential for it to be clear and professional :
It is possible to use a invoicing software, or a Word or Excel template, to generate a well-presented pro forma invoice.
Take the case of an artisan manufacturer of custom furniture. A customer wants to order a series of personalized chairs for his restaurant, but first wants to validate the budget with his seat. The craftsman sends him a detailed pro forma invoice, including the quantities, the materials used, the price per unit, the delivery costs and the manufacturing time.
The client uses this document to present the project to its management. Once validated, he transmits an order form, and the craftsman then issues a final bill corresponding to the confirmed order.
The pro forma invoice is a provisional document, intended to inform a customer about an offer before validation. It is very useful in commercial exchanges, in particular to present a structured quotation, support an administrative request or facilitate an order.
But be careful: it does not replace an official invoice, and does not have no legal, accounting or fiscal value. It is therefore essential not to confuse it with a final invoice. Once the transaction is concluded, it is necessary to generate a real invoice in accordance with legal obligations.
Used rigorously, the pro forma invoice can become an effective tool for professionalize your customer relationship, structure your commercial exchanges and save time in preparing your sales.
