Know How Pro Forma Invoices Can Help Decode Challenging Sales Cycles

Striking the productive balance between multiple facets of a business is no easy feat. The realization of delayed and unpaid invoices makes it furthermore demanding.

Fundbox surveyed a few SMBs to understand the impact of unpaid invoices and found that across the United States, on-time payments can help SMBs hire an additional workforce of 2.1 million employees.

Is there a strategy to effectually facilitate timely payments in SMBs?

A sales cycle initiated with a pro forma invoice can help streamline payment procedures. Check out the details right away.

Understanding Pro Forma Invoice

What Is a Pro Forma Invoice?

A pro forma invoice is a binding agreement sent to customers before or along with the project delivered. This invoice includes specifications like the number of project modules to be worked on, technical specifications, manpower involved, and billing hours. Though it contains a precise sales price including taxes and miscellaneous fees, this value is subject to changes.

Amongst the different types of invoices, the pro forma invoice is primarily utilized to provide a good faith estimate and save the customer from unpleasant surprises regarding the amount charged.

These invoices for small businesses help curb bottlenecks in their internal sales approval process. It also helps streamline sales procedures by eliminating chances of additional back-and-forth after the confirmation of a sales deal. Pro forma invoice ensures that the parties involved have agreed upon all conditions, before proceeding with the final deal.

When Is the Pro Forma Invoice Needed?

A pro forma invoice is used in the early stages of a project cycle when a service/product has been finalized and the payment is due.

  • A pro forma invoice in small business invoicing is needed as:
  • A proactive negotiating tool between the service provider and the customer.
  • A voluntary document to facilitate the smooth functioning of sales procedures.
  • A blueprint of the entire project cycle with key information to be used in the final invoice.

SMBs have begun to implement invoicing tools to facilitate faster payment cycles. Such tools do not limit to billing invoices, but also accommodate pro forma invoices to kick-start the sales cycle.

How Is Pro Forma Invoice Incorporated?

Pro Forma Statements for Business Mergers and Alliances

Undertaking a merger is based on the assurance of the parties involved. Pro forma documents help nurture, reinforce this assurance with appropriate declarations, and have the parties identify key considerations that may impact business processes.

Pro Forma for Start-Ups

A proposed start-up company may look towards potential investors for funding. A pro forma document, in this case, will assure that the start-up will be profitable and financially stable. This statement highlights the primary strengths of the proposed company, thereby acting as motivation to rely upon and invest.

Pro Forma Statements for Budgeting and Planning

A pro forma statement will include the required budget and timing about the company’s future cash requirements. It will include approximate estimates as placeholders that can be developed later. It helps companies to be financially equipped to prevent unprecedented delays and overdue payments.

Pro Forma for Retail Stores

When a customer approaches a retail store for a purchase, the order is placed and the product delivered. A pro forma invoice mentions the details of the purchase with an estimated charge. The final invoice is generated after product delivery. The final invoice is close to the estimate in the pro forma invoice. The buyer is free to make modifications and negotiate before the final invoice is sent.

What Is the Purpose of a Pro Forma Invoice?

The purpose of a pro forma invoice is to:

  • Provide an overview of the charges involved in the project cycle including project requirement, modules to be worked on, and billing hours involved.
  • Facilitate faster payment cycles by providing an estimated sales price, thus preparing the client to arrange necessary funds, resulting in prompt payments.
  • Declare value of the project with technical specifications, planned man-hours, and billing charges for legal clearance, if applicable.
  • Allow modifications in sales specifications before finalizing the delivery of products/services.

What Information Should a Pro Forma Invoice Contain?

A pro forma invoice should specify details of:

  • Invoice number
  • Name and address of service provider/customer
  • Name and address of service provider/ customer
  • Description of the products/services involved.
  • Detailed information about subtotals involving tax and deductions.
  • Details about additional charges, if any.
  • The validity of the invoice.
  • Proposed terms of sale.
  • Proposed terms of payment.
  • Certifications required by regulatory bodies.
  • A signature, stamp, and seal of the service provider.

What to Expect after Sending a ProForma Invoice?

After the proforma invoice is sent, the customer may proceed with the project, conduct negotiations or drop the sales deal. If the customer decides to continue with the project, he will begin the process of payment based on the terms mentioned in the pro forma invoice.

A few other aspects of proforma invoices are:

  • They are not finalized invoices and are open for modifications.
  • They cannot be used as a legal invoice for services as they do not have a unique invoice number.
  • This invoice format is not predefined and varies based on requirements.
  • They do not have a fiscal value and cannot be included in accounting records.


Incorporating proforma invoices into the sales cycle can be beneficial for both, the service provider and customer. As a part of the billing software for small businesses, these invoices provide a sneak peek into the sales cycle helping the service owner and customer to be well- equipped financially and strategically.

If you are a business owner facing similar challenges, initiate your next sales pitch with a proforma invoice generated by simple invoice software.

A good online invoicing software can help SMBs sending out effective proforma invoices to clients for speedy transactions. Have you started using one for your small business? Do let us know your thoughts.