Invoice vs Proforma: Understanding the Difference
When it comes to business transactions, there are a variety of documents involved. It’s important to understand the difference between an invoice and a proforma in order to ensure that all transactions are being handled correctly.
An invoice is a document that is sent to a customer after a product or service has been delivered. The invoice typically includes the amount owed for the product or service, the date the invoice was sent, the customer’s contact information, and payment terms. An invoice is used to collect payment from a customer, and is typically due within a certain period of time.
A proforma is a document that is sent to a customer before a product or service has been delivered. The proforma includes an estimated cost for the product or service, the customer’s contact information, and payment terms. A proforma is used to request payment from a customer before the product or service is delivered, and is typically due before the product or service is delivered.
The main difference between an invoice and a proforma is the timing of the payment. An invoice is sent after the product or service has been delivered, while a proforma is sent before the product or service has been delivered. Depending on the type of product or service being provided, either an invoice or a proforma may be used to collect payment.
It’s important to understand the differences between an invoice and a proforma in order to ensure that all business transactions are conducted properly. By understanding when and how to use each document, businesses can ensure that they are collecting payment in a timely manner.
Frequently Asked Questions
FAQ 1: What is the difference between an invoice and a proforma?
Answer: An invoice is a document sent by a seller to a buyer to indicate a transaction that has taken place and to request payment for the goods or services provided. A proforma invoice is a document sent by a seller to a buyer before the transaction has taken place and serves as a quote or estimate of the goods or services offered.
FAQ 2: When should I use an invoice?
Answer: An invoice should be used when goods or services have already been provided and payment is requested.
FAQ 3: When should I use a proforma invoice?
Answer: A proforma invoice should be used when goods or services offered by a seller have not yet been provided, but the buyer needs an estimate of the cost before making a purchase.
FAQ 4: Are invoices and proforma invoices legally binding?
Answer: An invoice is legally binding, as it indicates a transaction has taken place and payment is expected for the goods or services provided. A proforma invoice is not legally binding, as it is only an estimate of the cost and does not indicate a transaction has taken place.
FAQ 5: How long is an invoice or proforma invoice valid?
Answer: The validity of an invoice or proforma invoice depends on the agreement between the buyer and seller. Generally, an invoice is valid until the payment is received, while a proforma invoice is usually valid for a set period of time, such as 30 days.