A proforma invoice and an invoice are two different types of financial documents that are used to record and track payments for goods and services. Although they are similar in some ways, there are important differences between them that businesses should understand.
A proforma invoice is a document that is created by the seller before the sale is finalized. It is sent to the buyer to provide an estimate of the cost of the goods or services that they are interested in purchasing. This document is often used when the buyer needs to confirm the price before the sale is finalized. It is not usually used to track payments but instead is used to inform the buyer of the estimated cost of the goods or services.
An invoice, on the other hand, is a document that is created when the sale is complete. It includes the total cost of the goods or services purchased, as well as any taxes or other fees associated with the sale. Invoices are typically used to track payments from the buyer and ensure that the seller receives the full amount due for the purchase.
The primary difference between a proforma invoice and an invoice is that one is used to provide an estimate of the cost of goods or services before the sale is finalized, while the other is used to track payments from the buyer after the sale is complete. It is important for businesses to understand the differences between these two documents in order to ensure that they are properly tracking their payments and accurately reflecting their income.
Frequently Asked Questions
FAQ 1: What is the difference between a proforma invoice and an invoice?
Answer: A proforma invoice is a document that is generally issued by a seller to a buyer in advance of providing the goods or services. It contains information about the goods or services, as well as the expected price, terms of payment, and delivery information. An invoice is a document that is issued by a seller to a buyer after the goods or services have been provided. It contains information about the goods or services provided, the total amount due, and payment instructions.
FAQ 2: When should I use a proforma invoice?
Answer: Proforma invoices are typically used when a buyer requests one in advance of purchasing goods or services, or when a seller needs to provide an estimate of the total cost of a purchase before the goods or services are provided.
FAQ 3: Is a proforma invoice legally binding?
Answer: A proforma invoice is not legally binding, and is not considered an official invoice. It does, however, serve as an estimate of the cost of goods or services that will be provided, and can be used as a guide for payment.
FAQ 4: Can I use a proforma invoice instead of an invoice?
Answer: A proforma invoice can be used as a substitute for an invoice, but is not a legally binding document. It can be used to estimate the cost of goods or services before they are provided, but an official invoice should still be issued after the goods or services have been provided.
FAQ 5: How long is a proforma invoice valid?
Answer: A proforma invoice is usually valid for a limited period of time, and the validity period may vary depending on the agreement between the buyer and the seller. Generally, proforma invoices are valid for 30 days or less.