Quotation vs Proforma Invoice: Which One Should You Send?

A customer asks what something will cost. Do you send a quotation or a proforma invoice? Most businesses pick one out of habit and use it for everything, which is usually fine right up until it isn't.

What each document is

A quotation is an offer. It says: here is what I would charge you to do this work or supply these goods, and here is how long that offer stands. It invites the customer to say yes. It is a sales document.

A proforma invoice is a commitment in invoice form. It says: we have agreed on this, here is exactly what the final invoice will look like, and here is what to pay. It usually follows agreement rather than starting the conversation.

Critically, neither one is a tax invoice. Neither creates a VAT liability, neither belongs in your output VAT for the period, and neither entitles your customer to recover input VAT. The tax point comes later, with the real invoice.

When to send a quotation

• The customer is still comparing suppliers
• Scope, quantity, or specification could still change
• You want to set an expiry date on your pricing
• You need the customer's formal acceptance before you commit stock or time

A good quotation has a validity period. "Valid for 30 days" protects you when material costs move, and gives the customer a reason to decide.

When to send a proforma invoice

• The customer has agreed and needs a document to raise payment against
• Payment is required in advance of supply
• The customer's finance team needs something to process a bank transfer
• Goods are crossing a border and customs or a freight forwarder needs a declared value
• A letter of credit or an import permit needs to reference the transaction

That last group is where proforma invoices genuinely earn their place. Many overseas buyers cannot release funds against a document titled "Quotation", and many customs processes expect a proforma.

The mistake that costs money

The dangerous error is treating a proforma invoice as a tax invoice — recording it in your books as a sale, or letting a customer claim input VAT from it.

A proforma should be clearly marked as such and should not carry a sequential tax invoice number from your live invoice series. Once payment is made or the supply happens, you issue the actual tax invoice, and that is the document that hits your VAT return.

In the UAE, a tax invoice must be issued within 14 days of the date of supply. A proforma issued three weeks earlier does not satisfy that requirement, however similar it looks.

What each should contain

Quotation:

• The word "Quotation" and a quotation number
• Your details and the customer's
• Date and a validity or expiry date
• Itemised scope, quantities, and prices
• VAT shown as an indication of what will be charged
• Terms, exclusions, and lead time
• Space for customer acceptance

Proforma invoice:

• The words "Proforma Invoice" — prominently, so it cannot be mistaken for a tax invoice
• Your details, TRN, and the customer's details
• A proforma reference number from a separate series
• Full itemisation matching what will be supplied
• Indicative VAT and total
• Payment instructions and bank details
• A note that a tax invoice will follow

Getting the sequence right

The clean chain looks like this: quotation goes out, customer accepts, proforma goes out if they need it to pay, supply happens, tax invoice is issued, receipt confirms payment. Each document references the one before it.

Pyalm Books handles that chain natively — quotations convert to sales orders and then to invoices without re-keying, so the numbers stay identical from first offer to final receipt, and only the tax invoice touches your VAT return.

If you only need the documents themselves, the free invoice generator produces quotations, proformas, invoices, and purchase orders from the same form.

See how Pyalm Books handles the sales cycle | Create a quotation or proforma