Pro forma is a Latin term that means "for the sake of form" or "as a matter of form". It is used to describe a practice or document that is provided as a courtesy or satisfies minimum requirements, conforms to a norm or doctrine, tends to be performed perfunctorily or is considered a formality. In finance, pro forma refers to a method of calculating financial results using certain projections or presumptions. Pro forma financial statements are hypothetical financial statements that project future performance based on assumptions about future values. They can be used to forecast the future status of a company, based on the current financial statements, and can be issued to the public to highlight certain items for potential investors. Pro forma financial statements can also be used internally by management for aiding in business decisions.
Pro forma invoices are another type of pro forma document. They are presented in the place of a commercial invoice when there is no sale between the sender and the importer. A pro forma invoice is generally raised when the seller is ready for dispatching the material but they want to ensure that the payment is being sent before dispatch. Similarly, the customer also wants to know which components are included in the pro forma invoice to avoid disagreements later. Pro forma invoices basically contain much of the same information as the formal quotation, and in many cases can be used in place of one.
In summary, pro forma refers to a practice or document that is provided as a courtesy or satisfies minimum requirements, or a method of calculating financial results using certain projections or presumptions. Pro forma financial statements are hypothetical financial statements that project future performance based on assumptions about future values. Pro forma invoices are presented in the place of a commercial invoice when there is no sale between the sender and the importer.
