For small business owners and self-employed entrepreneurs, clear communication and professional documentation are key elements of building client trust and closing deals efficiently. One powerful but often overlooked document is the pro forma invoice. You may have heard of it in passing or seen it listed in accounting software options, but many still wonder: what is a pro forma invoice used for?

In this guide, we’ll dive into the purpose of a pro forma invoice, why it matters in modern business, and how Otto AI makes creating, sending, and managing them easier than ever.

Understanding What a Pro Forma Invoice Is
Before understanding how it's used, let’s quickly clarify what a pro forma invoice actually is.

A pro forma invoice is a preliminary invoice sent to a client before goods or services are delivered. Unlike a regular invoice, it’s not a bill and doesn’t require immediate payment. Instead, it outlines the expected costs, terms, and scope of the transaction so the buyer can review everything before finalizing the deal.

Think of it as a formal estimate or a commercial preview. It's a powerful tool that helps businesses and clients align on expectations—without the pressure of payment.

With Otto AI, creating a professional pro forma invoice takes just minutes, helping you make a strong, accurate first impression with every transaction.

What is a Pro Forma Invoice Used For?
Now that we’ve answered what is a pro forma invoice, let’s get to the core question: what is a pro forma invoice used for in day-to-day business?

1. Providing Cost Estimates
One of the primary uses of a pro forma invoice is to provide a detailed cost estimate to a client. This allows the buyer to understand what they’ll be paying for, including product prices, services, shipping, and taxes, before making a commitment.

Entrepreneurs can use Otto AI to build a clean, itemized pro forma invoice that outlines all expenses—no surprises, no confusion.

2. Custom Orders and Services
Pro forma invoices are perfect for custom work, where pricing and scope may differ from job to job. Designers, consultants, and other freelancers often rely on them to confirm pricing before beginning work.

Otto AI allows you to duplicate and adjust templates quickly for each unique project, making sure every client receives a tailored proposal.

3. International Trade
In international business, a pro forma invoice is often required for customs and shipping documentation. It allows customs authorities to determine the value of the goods being imported or exported.

With Otto AI, you can create export-ready pro forma invoices with all the necessary fields—making cross-border transactions smoother.

4. Securing Internal Approvals
For B2B sales, clients often need internal approval before placing an order. A pro forma invoice provides a formal document that decision-makers can review before giving the green light.

With Otto AI, businesses can send branded, professional-looking pro forma invoices that make client approvals faster and more likely.

5. Budgeting and Forecasting
Clients may use a pro forma invoice as part of their budgeting process. It allows them to account for future purchases and assess cash flow requirements.

If your business offers recurring services or multi-phase projects, Otto AI can help you schedule and track upcoming pro forma invoices, making it easier to plan your income.

6. Improving Client Communication
Pro forma invoices clarify exactly what a client is agreeing to. By itemizing products, timelines, pricing, and terms, you eliminate ambiguity.

Using Otto AI, you can send smartly formatted invoices that speak the client’s language—clear, concise, and professional—reducing back-and-forth emails and misunderstandings.

Pro Forma Invoice vs. Quotation vs. Invoice
Still wondering how a pro forma invoice differs from other business documents?

Document Type Purpose Binding? Payment Required?
Pro Forma Invoice Preview of a sale; estimate format No No
Quotation Informal price estimate No No
Invoice Final bill after product/service Yes Yes

Unlike a basic quote, a pro forma invoice includes more structure and detail, mimicking a final invoice—without being a request for payment.

With Otto AI, you can seamlessly convert a pro forma invoice into a final invoice when the deal is confirmed, without starting from scratch.

Who Uses Pro Forma Invoices?
Whether you’re selling products, offering freelance services, or handling international orders, a pro forma invoice may fit into your workflow. Typical users include:

Freelancers and Creatives: Writers, designers, and marketers who need client sign-off before starting work.

E-commerce Stores: Especially those shipping internationally.

Service Providers: Agencies and consultants proposing retainer packages.

Wholesalers and Distributors: Sending product previews and pricing.

Startups and Small Teams: Offering transparency in every client interaction.

Otto AI’s invoicing features are tailored for entrepreneurs and small teams who need professional documents without the hassle of complicated accounting systems.

How Otto AI Makes Pro Forma Invoicing Effortless
Now that you understand what a pro forma invoice is used for, the next step is implementation. That’s where Otto AI becomes your best business partner.

Here’s how Otto AI empowers entrepreneurs:

Custom Templates: Save time by using pre-designed layouts that look polished and are fully editable.

Client Profiles: Store customer info to auto-fill future invoices.

Quick Conversion: Convert pro forma invoices into final invoices in one click.

Cloud Storage: Keep all documents organized, accessible, and secure.

Automation & Tracking: Get notified when a client views your invoice or when action is required.

With Otto AI, you won’t just create documents—you’ll elevate your entire invoicing process.

Best Practices for Using Pro Forma Invoices
To get the most value out of your pro forma invoices:

Be Specific: Clearly itemize everything included in the sale or service.

Set Validity Terms: Indicate how long the offer is valid.

Include Delivery Timelines: Especially if you’re working with deadlines.

Add Notes for Clarity: Provide helpful context when needed.

Otto AI helps automate these best practices with intelligent fields and easy drag-and-drop tools, ensuring every pro forma invoice you send reflects your business’s professionalism.

Conclusion
So, what is a pro forma invoice used for? In short, it’s used to set expectations, build trust, and guide the sales process with transparency and professionalism. It’s more than a placeholder—it’s a communication tool, a planning tool, and a confidence booster for both you and your client.

And with Otto AI, creating and managing pro forma invoices has never been easier. From automation to personalization, Otto AI helps small businesses and self-employed professionals turn estimates into revenue with minimal effort and maximum impact.

If you're ready to take your invoicing to the next level, start with Otto AI today—and let every invoice reflect the value of your brand.

For More Information: https://joinotto.com/invoicing/pro-forma-invoice