What is a proforma invoice and when should you send one? Complete guide
Once a buyer agrees to your prices and quantities, you often need a formal-looking document to request a deposit or help their accounting team approve a bank transfer before you ship the goods. That document is a proforma invoice. Importantly, a proforma invoice is not an official tax invoice—it does not create an accounting receivable or deduct inventory, and statutory tax or electronic invoicing requirements must always be handled through your separate legal system. This guide explains when to use a proforma invoice, how it differs from a price quote and a final invoice, and how to manage the workflow cleanly in GiroPS.
A proforma invoice is a preliminary bill of sale sent before goods are delivered or services are completed, confirming agreed items, quantities, prices, and payment terms. It is not a legal tax invoice and does not deduct stock or alter customer account balances. Businesses use it to request deposits, clear buyer approval processes, and confirm orders before dispatch.
What is a proforma invoice and when do businesses use it?
A proforma invoice acts as a good-faith commitment between seller and buyer. Unlike an early exploratory quote, a proforma is issued when the buyer has essentially agreed to purchase, but the seller requires an advance payment, deposit, or internal purchase approval before releasing stock from the warehouse.
Visually, it looks almost identical to a standard invoice—showing line items, unit prices, discounts, taxes, and the grand total—yet it is clearly labeled as a preliminary document so neither party mistakes it for a completed tax transaction.
- Requesting deposits or advance payment: Gives the customer an itemized breakdown to pay a 30%, 50%, or 100% prepayment before production or shipping.
- Corporate buyer and bank approvals: Provides purchasing departments and banks with exact figures and bank details needed to authorize a wire transfer.
- Pre-shipment confirmation: Confirms final quantities, units, and shipping charges one last time before goods are packed and dispatched.
- Cross-border and customs preparation: Declares the commercial value and description of goods for freight forwarders, insurance, or import clearance.
- Custom or made-to-order jobs: Locks in the exact specifications and agreed pricing before you invest materials and labor.
Quote vs. proforma invoice vs. final sales invoice: key differences
Small business owners often wonder whether to send a quote, a proforma invoice, or a regular sales invoice. The difference lies in the stage of the deal and the impact on your inventory and customer ledger. A quote explores pricing; a proforma confirms the deal and requests payment prior to delivery; a final sales invoice records the actual sale once goods or services are delivered.
Crucially, neither a quote nor a proforma invoice changes your physical stock or your customer's receivable balance. In GiroPS, draft invoices and quotes are excluded from revenue totals and outstanding balances—only an approved sales invoice deducts inventory and updates the customer account.
| Criteria | Price Quote (Quotation) | Proforma Invoice | Approved Sales Invoice |
|---|---|---|---|
| Primary Purpose | Propose prices & negotiate terms | Confirm agreed order & request prepayment | Record completed sale & demand payment |
| Inventory Impact | No stock deduction | No stock deduction | Deducts sold quantities from warehouse |
| Customer Balance Impact | Does not affect contact balance | Does not affect contact balance | Posts receivable debt to customer contact |
| Accounting & Tax Status | Non-binding commercial offer | Preliminary document (not a tax invoice) | Final commercial bill (statutory e-invoicing separate) |
Legal clarity: A proforma invoice is not a statutory tax invoice
Every merchant and buyer must keep one boundary clear: a proforma invoice is not a legal tax invoice. It cannot be used to reclaim tax, cannot be booked as final revenue or expense in statutory accounting, and does not replace mandatory fiscal receipts or government e-invoicing systems.
To be completely transparent: GiroPS generates clean PDF quotes, proforma documents, and invoices for your daily business tracking, and does not issue government electronic invoices. In GiroPS, you can prepare a quote or save a sales invoice as a Draft to share as a preliminary PDF—since draft invoices never count toward totals or balances—and only approve the invoice once the sale is finalized, while issuing your statutory tax invoice through your required legal channel.
What details must be included on a proforma invoice?
To prevent confusion in the buyer's accounts payable team, a proforma document must be unmistakably labeled. Including a clear Proforma note and an expiration date ensures the buyer knows how long the reserved pricing holds and which bank account to pay.
All commercial calculations—line quantities, measurement units, line or document discounts, and applicable taxes—should match what will eventually appear on the final invoice so there are zero discrepancies after payment.
- Clear Proforma heading and dates: Prominent Proforma identification, document number, issue date, and price validity date.
- Seller and buyer contact details: Full business names, addresses, and contact information for both parties.
- Finalized line items and math: Product or service names, stock codes, quantities, units, unit prices, discounts, tax breakdown, and total.
- Payment instructions and delivery terms: Required deposit percentage or full prepayment amount, bank account details, and dispatch timeline after payment.
Moving from proforma to approved invoice and partial payment in GiroPS
Creating a proforma in a separate spreadsheet means you have to retype every line item when the customer pays. In GiroPS, you can manage this seamlessly using either a Quote or a Draft Sales Invoice. While a sales invoice remains in Draft status, it is completely excluded from revenue reports, stock deductions, and customer receivable balances.
When the customer sends the advance deposit and you ship the goods, you simply convert the quote or approve the draft invoice in one tap. You then record the deposit into your cash or bank account as a partial payment, leaving the exact remaining balance clearly tracked on the customer contact.
Step-by-Step Implementation
1. Select the customer contact and start a quote or draft invoice
Choose the buyer from your contact list. Open a new quote or create a sales invoice and keep its status set to Draft.
2. Enter the agreed products, units, discounts, and taxes
Add the exact items and quantities the buyer confirmed, apply any agreed line or document discounts, and verify the tax calculation.
3. Add Proforma labeling, deposit terms, and bank details in the notes
State clearly in the document notes that this is a Proforma document for advance payment, and include your bank details and validity date.
4. Share the PDF document via WhatsApp or email
Export and send the clean PDF to your customer so their purchasing or finance team can process the advance payment.
5. Approve the invoice upon dispatch and log the payment
Once payment arrives and goods are shipped, convert or approve the sales invoice so stock deducts, and record the deposit against the invoice balance.
Practical scenario
Example: Commercial kitchen supplier requesting a 30% deposit via proforma
A coffee equipment supplier agrees to sell 2 commercial espresso machines, 2 grinders, and an installation package to a new cafe for a total of $8,000 including tax. Before shipping the heavy equipment, the supplier sends a proforma PDF requesting a 30% deposit ($2,400). At this stage, warehouse stock does not change. Once the buyer wires $2,400 and the machines are dispatched, the supplier approves the sales invoice in GiroPS and logs the $2,400 payment, leaving a $5,600 remaining balance due in 30 days.
| Workflow Stage | Document / Action | Warehouse Stock Effect | Customer & Cash Balance Effect |
|---|---|---|---|
| 1. Order Agreement | $8,000 Proforma / Draft PDF sent | No change (0 deducted) | Receivable balance remains $0 |
| 2. Advance Deposit | Customer wires 30% ($2,400) | Items prepared for dispatch | Bank account +$2,400; advance logged |
| 3. Dispatch & Approval | Sales Invoice approved ($8,000) | 2 machines & 2 grinders deducted | Invoice total posted to contact ledger |
| 4. Balance Tracking | Partial payment applied to invoice | Delivery completed | Remaining invoice balance: $5,600 |
Common Pitfalls & How to Avoid Them
Frequently Asked Questions
Is a proforma invoice a legally binding tax invoice?
No. A proforma invoice is a preliminary commercial document used to confirm prices and request payment before delivery. It is not a legal tax invoice; statutory invoicing and e-invoicing requirements must be fulfilled through your separate legal system.
Does GiroPS issue official government e-invoices?
No. GiroPS generates professional PDF quotes, proforma documents, and sales/purchase invoices for your operational tracking and customer sharing, and does not issue official government e-invoices.
Do draft invoices in GiroPS affect my stock levels or customer balances?
No. Draft invoices are completely excluded from sales totals, do not show as outstanding receivables, and do not deduct warehouse stock. Stock and customer balances update only when the invoice is approved.
How do I record a deposit received against a proforma document?
You can log the incoming payment into your cash or bank account in GiroPS. When the sales invoice is approved, the partial payment reduces the invoice's remaining balance automatically.
Can I create a proforma PDF in a foreign currency?
Yes. You can select any currency for the document and enter the exchange rate so your customer receives a PDF in their currency while your business currency records stay accurate.
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