Pro forma invoice
A preliminary invoice sent before goods ship or work starts, showing what the final bill will be. It is not a demand for payment.
In short
- It is used for quotes, deposits and customs, not for recording a payable.
- It cannot support an input tax credit claim. The final invoice does.
- Paying a pro forma and then the final invoice is a classic duplicate payment.
A pro forma invoice looks like an invoice but works like a formal quote. It sets out the goods or services, prices, taxes and terms a seller expects to bill, before the sale is complete. Buyers use it to get internal approval, arrange financing or pay a deposit; importers use it so customs can estimate duties before the shipment arrives.
How to treat it in the books
Because nothing has been delivered and the amounts can still change, a pro forma is not recorded as an account payable. If a deposit is paid against it, the payment is recorded as a prepayment or deposit to the supplier. When the real invoice arrives, it is booked as the payable and the deposit is applied against it.
For sales tax, only the final invoice counts. A pro forma does not give the buyer the right to claim an input tax credit.
The duplicate payment risk
A pro forma and the final invoice often share the same supplier, amount and description, but carry different numbers. If both reach accounts payable and both are treated as bills, the buyer pays twice. Clear labelling helps, and so does a duplicate check that compares supplier, amount and date rather than invoice number alone.
Worked example
A deposit on equipment
A café orders a $9,000 espresso machine. The supplier sends a pro forma for $10,170 including HST and asks for 30% up front. The café pays $3,051 and records it as a supplier deposit. Six weeks later, the final invoice for $10,170 arrives. It is booked as the payable, the $3,051 deposit is applied, and $7,119 is paid. The HST credit is claimed on the final invoice only.