Proforma Invoice
Also called: pro forma invoice
What is Proforma Invoice?
A proforma invoice is a document sent before supply that sets out what will be delivered, at what price and on what terms, and asks for payment — typically an advance. It looks like an invoice but is not one: it creates no GST liability for you and supports no input tax credit for your customer.
Where it sits between a quotation and a tax invoice
A quotation is an offer, open for acceptance and usually carrying a validity date. A proforma invoice is issued after the customer has agreed in principle and is ready to pay, but before the goods move or the work is done. A tax invoice is issued on or after supply and is the only one of the three that carries tax.
When a proforma invoice earns its place
- Taking an advance before starting work or releasing stock
- Giving a buyer a document their finance team can raise a payment against
- Supporting a customs, freight or import formality that needs a valued document
- Confirming price, quantity and delivery terms in writing without triggering a tax point
What it must not do
It should never be numbered in the tax invoice series, never be recorded as a sale, and never be given to a customer as support for an input tax credit claim. Mark it clearly as a proforma invoice so nobody in either business mistakes it for the real thing, and issue the tax invoice separately once supply happens.
Common mistakes
The two that cause real trouble are treating the advance received against a proforma invoice as revenue before supply, and never following it with a tax invoice at all — leaving the sale unrecorded and the customer unable to claim credit.
Frequently asked questions
No. It is not a tax invoice, so it creates no output tax liability on issue and gives the recipient nothing to claim credit against. Tax treatment of any advance you actually receive is a separate question for your accountant.