We will show it on Xero accounting software, but if you are using a different one, there is a high chance, it works in a fairly similar way. However, don’t worry, there is a hack you can do to make it work! If you are using a small business accounting software, you might not have the option to issue one – as proforma invoices are usually used by bigger companies. How to use them?ġ.) Issue a proforma invoice to your clients and wait for the paymentĢ.) Once you have received the payment, send a sales invoice to your client (it’s often just a copy of the proforma invoice, but with the ‘Invoice’ as the heading). However, as proforma invoices are not actual invoices, they don’t count as a VAT invoice and they are not included on the VAT return. Therefore if the company issued an invoice, they would be due to pay the VAT on it, prior to receiving payment from the customer.

Why would companies issue one?Ĭompanies issue proforma invoices, where the client has to usually pay a big amount and they are often on longer payment terms (eg. It is closer to a quote, but it is a request for payment.

The key difference is that a pro forma invoice is a ‘preliminary bill’ meaning it is not an actual bill. You might rightly ask: ok, so what is the difference between an invoice and a proforma invoice? The invoice will typically describe the purchased items and other important information, such as the shipping weight and transport charges. A pro forma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods.

Forma invoice meaning