How pro forma invoice works
A pro forma invoice is often used to give a customer a clear price estimate before an order is confirmed, for international shipments where customs documentation is needed, or for large orders where the customer wants to see final numbers before committing. It looks like a regular invoice but is clearly labeled as pro forma.
Once the customer agrees to the terms and the order or service is actually delivered, a real invoice is issued to replace the pro forma version. Only the real invoice is recorded in the accounting system and counted as accounts receivable, since the pro forma version was only ever an estimate.
Example
An exporter sends a pro forma invoice for $12,000 worth of goods so the buyer can arrange financing and customs paperwork before shipment. Once the goods ship and the order is confirmed at the same $12,000, the exporter issues the actual invoice, which is the one recorded as accounts receivable and tracked for payment.
Pro forma invoice in QuickBooks Online vs Xero
QuickBooks Online does not have a dedicated pro forma template, so businesses typically create one using an estimate marked accordingly or a duplicated invoice template. Xero offers a similar workaround through its quote feature, which can be formatted to look like a pro forma invoice before conversion to a real invoice.
Common mistakes
- A pro forma invoice gets mistakenly recorded in accounts receivable as if it were a real invoice, overstating revenue and outstanding balances that do not actually exist yet.
- Customers attempt to pay against a pro forma invoice directly, creating a payment with no real invoice to apply it to until a proper invoice is issued.
- The final invoice ends up differing from the pro forma version without anyone flagging the change, leaving the customer confused about what they actually owe.
Why it matters
A pro forma invoice lets a business give a customer firm numbers before a sale is finalized, which matters for international shipments, financing applications and large orders needing approval first. Treating it as a real invoice inflates receivables and misstates revenue, which can mislead an owner reviewing cash position or a lender reviewing financial statements. Keeping pro forma and real invoices clearly separated protects the accuracy of both.
Related terms
How LedgerBPO handles pro forma invoice
We prepare pro forma invoices for quotes, international orders, or large deals that need pre-approval before billing, then convert them to a real invoice once the order is confirmed. A dedicated accountant keeps both documents consistent so nothing gets missed at the final billing stage. You get accurate estimates and a smooth handoff to the real invoice.