# Proforma Invoice vs Invoice: Differences, Templates, and When to Use Each > Proforma invoice vs invoice compared. Definitions, when to send a proforma, legal and tax implications, and how SaaS teams use both in B2B billing. - **Author**: Ayush Agarwal - **Published**: 2026-06-10 - **Category**: Billing, Invoicing, Glossary - **URL**: https://dodopayments.com/blogs/proforma-invoice-vs-invoice --- A proforma invoice is a preliminary document a seller sends a buyer before a transaction is complete. It looks like an invoice but it is not one. A regular invoice (sometimes called a "tax invoice" or "commercial invoice") is the formal demand for payment that creates accounting and tax obligations. For SaaS businesses with B2B customers, knowing when to send a proforma vs a final invoice prevents accounting confusion, tax exposure, and customer pushback. This guide explains the difference, the typical use cases, and the rules in major jurisdictions. ## Quick comparison | Dimension | Proforma Invoice | Invoice | |---|---|---| | Purpose | Quote / preview / commitment doc | Demand for payment | | Triggers tax obligation | No | Yes | | Triggers accounts receivable | No | Yes | | Customer pays from it | Sometimes (allowed in some jurisdictions) | Yes | | Invoice number on it | Sometimes (clearly marked "proforma") | Yes, official sequential | | Legal seller commitment | Soft (preview only) | Hard (binding sale) | | When sent | Before transaction confirmed | After/at point of sale | The simplest way to think about it: a proforma is a "what the invoice will look like if you proceed" document. The real invoice comes when the deal is real. ## What goes on a proforma invoice A proforma invoice typically includes: - The word "PROFORMA" or "PROFORMA INVOICE" prominently - Seller name and address - Buyer name and address - Description of goods or services - Quantity, unit price, total - Estimated taxes (clearly noted as estimates) - Payment terms and methods accepted - Validity period (proformas usually expire after 30 to 90 days) - A note that this is not a tax invoice It does NOT include: - A formal invoice number from the seller's official sequence (sometimes a separate proforma number is used) - Definitive tax amounts (those go on the real invoice) - Language obligating immediate payment ## When SaaS uses proforma invoices ### 1. Annual contract sales (most common) A sales rep is working on a B2B SaaS deal worth $50K per year for 3 years. The customer's procurement team needs a document showing exactly what they will be billed before they can issue a Purchase Order. The seller sends a proforma invoice for $50K (year 1). The customer issues the PO referencing it. The seller then issues the real invoice once the contract is signed. ### 2. Customs and import documentation A SaaS that ships any physical component (hardware, branded merchandise, USB security keys) might send a proforma to the customer's customs broker before shipping. This is more common with hardware-adjacent SaaS than pure software. ### 3. International payments with bank approval requirements In some jurisdictions, the buyer's bank requires a proforma invoice to release foreign currency for an international wire transfer. The proforma documents the transaction the wire will pay for. ### 4. Quote-with-commitment workflows Some sales motions use proformas as a "soft quote" with a defined acceptance path. The customer accepts the proforma (digitally or via email), the deal converts, and the real invoice follows. This is a richer pattern than a plain quote because it carries a fuller payment instruction. ### 5. Trial conversion pricing previews For B2B SaaS converting trials to paid, sending a proforma invoice 7 days before trial end shows the customer exactly what they will be charged. Many enterprise buyers prefer this preview before the actual charge. ## When SaaS sends a regular invoice For most SaaS billing, the regular invoice is what gets sent at the billing event: - Subscription renewal: invoice issued on renewal date - Usage-based billing: invoice issued at end of usage period - One-time purchase: invoice issued at point of sale - Implementation fee: invoice issued when service is delivered (or per contract) The regular invoice creates the accounts receivable balance and the tax obligation. It is the official record of the sale. ## Legal and tax differences ### A proforma invoice is not a tax document A proforma does not enter the seller's tax records. It does not trigger VAT, sales tax, or GST collection. It does not generate a tax invoice obligation for the buyer to claim input tax credit. When the real invoice is issued, that is when: - The seller records revenue (subject to accrual / cash accounting rules) - The buyer can claim input VAT credit (if applicable) - The transaction enters the seller's tax filings - The buyer's accounts payable balance updates ### Proformas in specific jurisdictions - **EU VAT**: A proforma can be sent before the tax point. It must clearly state "proforma invoice" and not include the official invoice number from the seller's tax sequence. - **UK VAT**: HMRC treats a proforma as a non-VAT document. The real VAT invoice is required for the customer to claim input tax. - **India GST**: A proforma is not a GST invoice. It cannot be used by the buyer for input tax credit claims. The supplier must issue a proper GST invoice for the tax to flow. - **US sales tax**: Proformas have no sales tax consequence. The real invoice is what triggers the sales tax obligation. > If the buyer asks for a proforma but tries to pay it as if it were a real invoice, the seller faces a reconciliation problem. The cash is in but the tax invoice has not been issued. Always send the real invoice immediately after receiving payment. > > \- Ayush Agarwal, Co-founder & CPTO at Dodo Payments ## Proforma to invoice workflow A clean workflow: ```mermaid flowchart LR A[Customer requests quote] -->|"prepares proforma"| B[Send proforma invoice] B -->|"customer approves"| C[Customer issues PO] C -->|"sales contract signed"| D[Send real invoice] D -->|"customer pays"| E[Reconcile and recognize revenue] ``` Each step has a clear handoff. The proforma can sit in the pipeline for weeks without consequence. The moment the real invoice is issued, the accounting and tax clocks start. ## Proforma invoice templates A minimal proforma template: ``` PROFORMA INVOICE Proforma Number: PRO-2026-0001 Date: 2026-06-15 Valid Until: 2026-08-15 From: Your SaaS Inc 123 Main St, San Francisco, CA 94105 To: Acme Corp 456 Market St, New York, NY 10001 Attn: AP Department Description Qty Unit Price Total ----------------------------------------------------------------------- Annual Pro Subscription - 2026/2027 1 $50,000 $50,000 Implementation Services 1 $10,000 $10,000 ----------------------------------------------------------------------- Subtotal $60,000 Estimated Sales Tax (NY @ 8.875%) $5,325 Total Estimated $65,325 Payment Terms: Net 30 from invoice issue Payment Methods: ACH, Wire, Check NOTE: This is a PROFORMA INVOICE for quotation and planning purposes only. It is not a tax invoice and does not establish a payment obligation. A formal invoice will be issued upon contract execution. ``` Things to ensure: - "PROFORMA INVOICE" prominent at the top - A proforma-specific number, not from the official invoice sequence - A validity / expiration date - Estimated taxes labeled as estimates - The disclaimer that this is not a tax invoice ## Common mistakes ### 1. Treating the proforma as the official invoice Sometimes a customer pays from the proforma directly. If the seller does not then issue the real invoice promptly, the accounting and tax records are out of sync. Always issue the real invoice immediately after the proforma is paid. ### 2. Reusing the proforma number as the invoice number The proforma should have its own number sequence. Reusing the proforma number as the official invoice number muddles the audit trail. ### 3. Letting proformas pile up unconverted A pipeline full of unconverted proformas signals stale sales activity. Proformas should have validity periods (30 to 90 days) and should be either converted to real invoices or closed out. ### 4. Sending a proforma instead of a quote in casual sales For lightweight quotes, a simple quote document is cleaner than a proforma. Reserve proformas for transactions that need the "this is what the invoice will look like" formality. ## Proforma and merchant of record billing When a SaaS sells through a [merchant of record](https://dodopayments.com/blogs/what-is-a-merchant-of-record), the MoR is the legal seller. If a proforma is sent to the customer, it should be issued under the MoR's identity (since the MoR is the entity that will issue the real invoice). For Dodo Payments specifically, the platform handles invoicing on your behalf for subscription and one-time transactions. Proforma workflows for enterprise deals can be set up to match the MoR billing identity, keeping the documentation trail clean. ## FAQ ### What is a proforma invoice? A proforma invoice is a preliminary document that previews what an upcoming real invoice will look like. It is used for quotes, customs documentation, bank wire pre-approval, and procurement workflows. It does not create accounting or tax obligations. ### Can a customer pay from a proforma invoice? In some jurisdictions, yes, especially for international wires that require pre-payment documentation. In others, the buyer's AP system will not process payment without a real invoice. Always issue the real invoice promptly after receiving payment from a proforma. ### Is a proforma invoice the same as a quote? Similar but more formal. A quote is typically a sales estimate. A proforma is structured like an invoice and is used in workflows where the receiving party needs invoice-shaped documentation (customs, bank approval, procurement). ### Does a proforma invoice trigger VAT or sales tax? No. A proforma is not a tax document. VAT, GST, and sales tax obligations are triggered by the real invoice, not the proforma. ### How does a merchant of record handle proforma invoices? When the MoR is the legal seller, any proforma should be issued under the MoR's identity. The MoR's billing system handles the conversion from proforma to real invoice when the deal closes. ## Conclusion Proforma and real invoices serve different purposes. Use proformas for preview, planning, and procurement-driven workflows. Use real invoices for the actual demand for payment that creates accounting and tax records. Mixing them up creates reconciliation and audit problems. For SaaS that wants billing handled across global tax jurisdictions, [Dodo Payments](https://dodopayments.com) handles invoice generation and tax remittance as merchant of record. See [pricing](https://dodopayments.com/pricing). --- - [More Billing articles](https://dodopayments.com/blogs/category/billing) - [All articles](https://dodopayments.com/blogs)