Pro forma invoices

The name means "as a matter of form", and the document is exactly that: an invoice in form, without the legal weight. It lists the same things, from the items and prices to your payment details, so the client can see what they would be paying. But nothing has been supplied yet, and the client may never go ahead.

When to send one

Three situations call for one:

• You want paying before you start. A new client, a large order or materials you have to buy in. The pro forma says what to pay, and the work starts when the money arrives.
• The client's process needs a document first. Some accounts teams cannot raise a payment or a purchase order without something invoice-shaped to attach. A pro forma gives them that without you invoicing for work not yet done.
• Goods are crossing a border. Customs sometimes needs a statement of what is in a parcel and what it is worth before the sale is final. That use has a meaning of its own, covered further down.

If the client has agreed the price and you are happy to be paid after the work, you don't need one. Send the invoice when the work is done, or a deposit invoice if you want part of it first.

Why it is not a VAT invoice

A pro forma cannot be used to reclaim VAT, even if it shows every detail a VAT invoice would. HMRC says so plainly in VAT Notice 700, section 17.3: pro-forma invoices "cannot be used as evidence to reclaim input tax, even if they show all the details required for a VAT invoice", and "you should make sure that they're clearly marked 'this is not a VAT invoice'". Section 19.5.1 repeats it from the client's side: an invoice marked "pro-forma" is not evidence for reclaiming input tax.

So put both on it: the title "Pro forma invoice", and the words "This is not a VAT invoice" where the client will see them. A client who files it as a real invoice and reclaims the VAT on it is the problem that marking prevents.

What to send once they pay

Once you are paid, or once you supply the work, send a proper invoice. HMRC's words in section 17.3 are that if after issuing a pro forma "you actually supply the goods or services to your customer, or receive payment, then you must issue a proper VAT invoice". If you are not VAT-registered, the same habit still makes sense: the invoice is the document both of you keep in your books, and the pro forma is not.

There is a VAT reason the pro forma comes first, too. Under section 14.2.2, issuing a VAT invoice or receiving a payment before the work is done creates the tax point, the date from which you owe the VAT. A VAT invoice sent up front would make the VAT due even if the client never paid, unless you use the cash accounting scheme. A pro forma is not a VAT invoice, so sending one creates no tax point: the payment does, and that is when the real invoice goes out.

Numbering

Keep pro formas out of your invoice sequence. That sequence records what you have actually invoiced, and a pro forma that never turns into a sale would leave a gap in it. I'd give them a series of their own with a different prefix, such as PF-0001, so one is never mistaken for an invoice. Invoice numbering covers why the invoice sequence is worth protecting, and the invoice number generator can draft a second series.

When the client pays, the invoice takes the next number in the invoice series, not the pro forma's. It can mention the pro forma's number in its notes, so the client can match the two.

Pro forma invoices in customs

In shipping, the term has a narrower meaning. In the United States, for example, 19 CFR 141.85 sets out the form of a pro forma invoice as an importer's statement of the value or the price paid, which opens "Not being in possession of a commercial seller's or shipper's invoice". That is a customs document with its own rules, and it is a question for the carrier or a customs broker, not something this guide covers. The invoice that goes with the goods once they are sold is a commercial invoice.

Making a pro forma in the invoice generator

The invoice generator here has no separate pro forma type, but its wording can be changed to make one:

1. Change the number to one from your pro forma series, such as PF-0001.
2. Press + Change wording and set Document title to "Pro forma invoice".
3. In the same section, you can set Due date to "Pay by" or "Valid until", whichever fits.
4. In Notes, write "This is not a VAT invoice." and, if you like, that an invoice will follow once payment is received.

When the client pays, press + New invoice. The title and notes start empty again, but the number carries on from the pro forma, as PF-0002, so change it to the next number in your invoice series. Then put the pro forma's number in the notes. The pro forma stays in the invoice history under its own number, so you can find it again.