Proforma Invoice Payment Terms — What to Include and How to Word Them

Payment terms on a proforma invoice define when, how, and in what amounts the buyer must pay. Vague payment terms are the single biggest cause of cash flow problems for exporters and B2B sellers — the proforma invoice is your opportunity to lock in clear terms before production starts.

Why payment terms matter on a proforma invoice

The proforma invoice is a pre-shipment document. Unlike a commercial invoice (where goods are already dispatched), the proforma records the agreed payment schedule before any work begins. Banks, letters of credit, and buyer finance teams all rely on the payment terms stated here.

The most common proforma invoice payment terms

1. Advance payment (T/T in advance)

Wording: "100% advance by Telegraphic Transfer (T/T) before production."

Used for: new buyers, small orders, custom/OEM goods, high-risk markets. The safest structure for the seller — no credit risk.

2. Split advance: 30/70 or 50/50

Wording: "30% advance (USD 3,000.00) by T/T within 7 days of proforma acceptance; 70% balance (USD 7,000.00) by T/T before dispatch."

Used for: established buyers, manufactured goods, most international B2B transactions. Most common export payment structure.

3. Letter of Credit (LC) at sight

Wording: "100% by irrevocable Letter of Credit at sight, in favour of [Seller Name], to be opened within 15 days of proforma acceptance. LC to be valid for 90 days from opening date."

Used for: high-value orders, new relationships, countries with currency controls. The buyer's bank guarantees payment on presentation of shipping documents.

4. Letter of Credit with usance (deferred payment)

Wording: "By irrevocable LC at 60 days sight, meaning payment is due 60 days after the buyer's bank receives correct shipping documents."

Used for: buyers who need time to sell the goods before paying. Seller gets bank guarantee; buyer gets credit period.

5. Net 30 / Net 60 (open account)

Wording: "Net 30 days from invoice date."

Used for: trusted long-term buyers, domestic transactions, low-risk markets. Avoid for new international buyers — no payment guarantee.

6. Milestone billing (construction and projects)

Wording: "30% on signing (USD 15,000); 40% on delivery of structure (USD 20,000); 30% on completion and handover (USD 15,000)."

Used for: construction, software development, engineering projects. Each milestone triggers a payment tranche.

What else to include alongside payment terms

• Currency — state explicitly: "All amounts in USD." Ambiguity causes disputes.
• Bank details — account name, bank name, SWIFT/BIC, IBAN or account number, bank address. Include these on every proforma so the buyer can wire immediately.
• Validity date — "These payment terms are valid until 03 Aug 2026." After that date you may revise pricing.
• Late payment clause — optional but useful: "Balances overdue by more than 14 days incur 1.5% monthly interest."
• Production trigger — "Production commences upon receipt of cleared advance payment."

Sample payment terms block (copy-paste)

Use the free proforma invoice generator to add payment terms, bank details, and download a PDF instantly. Or download a ready-made template with a payment terms section pre-formatted.