Proforma invoice or invoice? The difference that matters

A proforma invoice looks almost exactly like an invoice, which is why it causes so much confusion. The difference is not the layout. It is what the document commits you to.

What each one is

A proforma invoice is an offer. It says: this is what I will supply, at this price, on these terms, if you accept. It creates no debt, it does not belong in your sales figures, and it is not a tax document.

An invoice is a demand for payment for something already supplied or agreed. It creates a receivable, it counts as revenue, and where you are VAT registered it is the document the tax rests on.

When to send which

Send a proforma when the client needs a formal document before committing: to raise a purchase order, to release budget, to arrange a transfer, or to clear goods. Many organisations cannot start their internal approval without one.

Send an invoice when the work is done, the goods have shipped, or you have agreed payment in advance and the client is ready to pay. If you are not prepared to chase the money, it is too early for an invoice.

What to change when it becomes real

• Change the heading. It should read Invoice, not Proforma Invoice. This is the part people forget.
• Give it an invoice number from your real sequence. A proforma should not consume one; if it did, you would have a gap whenever a quote is not accepted.
• Set the issue date to the day you invoice, not the day you quoted.
• Set real payment terms and a due date.
• Confirm the amounts still hold. A quote from two months ago may not.

Do not let a proforma count as revenue

The most common bookkeeping error here is a proforma sitting in the same list as real invoices, quietly inflating what you think you are owed. Keep quotes separate from money owed, and let an accepted quote become an invoice deliberately rather than by drifting into the same pile.

A note on wording

Because a proforma is an offer, it helps to say how long it stands. “Valid for 30 days” costs you nothing and saves the conversation where a client accepts a price you quoted last year.