Pro Forma Invoice - definition & overview
Contents
What is a pro forma invoice?
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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