Small Business Glossary

Pro Forma Invoice - definition & overview

Contents

A pro forma invoice is a document used by Australian small businesses to outline the details of a planned sale before the goods or services are delivered or the work is completed. It's essentially a preliminary bill of sale that clarifies what the customer will receive and how much they'll be expected to pay.

Key Points relating to pro forma invoices:

  • Not a tax invoice: Pro forma invoices are not official tax invoices and cannot be used for GST or income tax purposes.
  • Confirmation of agreement: It acts as a confirmation of the agreed-upon price and description of goods or services between the business and the customer.
  • Benefits:
    • Helps secure customer commitment by outlining the terms.
    • Useful for customs clearance when importing goods.
    • Provides transparency around pricing and avoids payment confusion later.
  • What to include:
    • Clearly labelled as "Pro Forma Invoice"
    • Your business details (name, ABN, contact information)
    • Customer details (name, address)
    • Date of issue
    • Description of goods or services
    • Price per unit and total cost
    • Any applicable GST or other taxes
    • Optional: Payment terms (though not a request for immediate payment)

How are pro forma invoices used?

  • Providing a quote to a potential customer.
  • Obtaining a deposit for custom work.
  • Facilitating international trade (e.g., customs clearance).

Remember: A pro forma invoice is not a binding contract, and prices may be subject to change depending on circumstances. It's a helpful tool to establish clear expectations with your customer before finalising the sale.

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