Tax Invoice vs Proforma Invoice | What are the Differences

Whenever we make sales, we issue invoices. A proforma invoice is similar to an invoice describing goods or services yet to be delivered to the customer. In order to provide buyers with information regarding prices, quantities, additional charges, and terms and conditions, it is issued before a final invoice is issued. This means that customers can tell the company before the invoice is issued if they have any objections, so the invoice does not have to be revised.

Both the documents tax invoice and proforma invoice are important, but the invoice is much more critical, and the proforma invoice is most commonly used in import and export transactions. A Proforma invoice will not create binding obligations for the client as it is not a legal document. Let's discuss the differences between a standard invoice and a proforma invoice in detail:

• What is the exact definition of a tax invoice and proforma invoice?

Generally, an invoice is a commercial legal document that confirms the sale and that payment is due to the purchaser of the product or service. On the other hand, a Proforma Invoice is an estimate or quote sent before delivery, including the specifics of the goods and services and their costing.

• When do we issue a tax invoice and a proforma invoice?

We issue invoices before the payment but after the product or service delivery, while proforma invoices are issued before the order is placed.

• What is the aim of a tax invoice and a proforma invoice?

The seller informs the buyer that the purchase price has been paid for the goods or services provided by issuing an invoice. Invoices are legal documents, whereas proforma invoices are not, as they inform the buyer of what is expected.

• What is the difference between tax invoice and proforma invoice formats?

The invoice includes complete information such as logo, contact information, billing addresses and other billing details, and terms and conditions. A proforma invoice also contains the same details but will be titled "Proforma Invoice".

• How can we use tax invoices and proforma invoices in the accounting process?

Proforma invoices are not strictly necessary for accounting purposes, as they are only used for informing the client of the amount due and the date of payment. The invoice should be kept for reference and properly filed. In addition to accounting purposes, it is used for audit purposes. It also records the amount of money owed or received by the client.

Note that you can simplify the process of making a tax invoice and proforma invoice on the Kernel website.