Proforma Invoices: Asking for Payment Before You Bill
A proforma is a request, not a bill. It records no sale, creates no tax liability and no debt — and that distinction is the whole point of having one.
You need an advance before you mobilise. The customer needs a document to raise their internal approval against. What you must not do is issue a tax invoice, because you have not delivered anything and the tax would become payable.
That document is a proforma invoice.
What a proforma does not do
The important thing about a proforma is everything it leaves alone:
- it does not record a sale
- it does not create a tax liability — it is not in your GST return
- it does not create a debt — nobody owes anything on it
- it does not consume any of the work order's value
It is a quotation wearing an invoice's clothes. The tax invoice it later becomes does all four of those things.
Its life
| Status | Meaning |
|---|---|
| Draft | Written, not sent |
| Sent | Given to the customer |
| Converted | It has become a tax invoice — that invoice is now the real document |
| Cancelled | Withdrawn, with no trace in the accounts because it never entered them |
Converting is the moment anything is actually billed, and the moment the work-order check applies. A proforma that has become a tax invoice cannot be cancelled — you raise a credit note against the invoice instead.