Proforma Invoice vs Invoice: When Each One Counts

A proforma invoice looks like an invoice and does none of the things an invoice does. It is a quotation formatted like a bill: here is what this will cost, here is what to pay, here are our bank details. It creates no receivable, no revenue, no VAT liability and no ledger entry whatsoever.

That is not a limitation — it is the entire purpose. A proforma lets you tell a customer exactly what they will owe without triggering any of the consequences of actually invoicing them.

The difference that matters

	Proforma invoice	Invoice
Legal status	A commercial offer	An accounting document under VAT law
Creates a receivable	No	Yes
Recognizes revenue	No	Yes (when earned)
Triggers VAT	No	Yes — output VAT becomes due
Sequential numbering	Not required	Required
Posts to the ledger	No	Yes
Customer can deduct VAT	No	Yes

The VAT row is the one with teeth. Issuing a document that qualifies as an invoice makes the output VAT payable to the state on that period's VAT return, regardless of whether the customer pays you. A proforma does not, because it is not an invoice within the meaning of the VAT Directive — and correspondingly, your customer cannot deduct input VAT from it, no matter how much they would like to.

This cuts both ways. Accepting a proforma from a supplier and claiming the VAT on it is an error that will be disallowed; you need the real invoice.

When a proforma is the right document

• Advance payment requests where nothing is delivered yet. Common in export, custom manufacturing and new customer relationships: pay first, then we produce.
• Quotations the customer needs in invoice format to open a purchase order or start an internal approval flow.
• Customs and shipping documentation for goods being sent where a commercial invoice isn't yet appropriate — samples, replacements, goods for repair.
• Confirming amounts before a deal closes, where issuing a real invoice would create a VAT liability on a sale that may not happen.

When it is the wrong one

The mistake is using a proforma to delay VAT on a sale that has already happened. If the goods are delivered or the service performed, the invoice obligation exists and the tax point has been reached — sending a proforma instead does not postpone the VAT, it just means the required invoice hasn't been issued. Member states set deadlines for issuing invoices, and the liability arises regardless.

The other mistake is subtler: treating proformas as a numbering series that customers pay against, then never issuing the real invoices. The money arrives, nothing is recorded, and the period closes with revenue missing.

The advance-invoice alternative

If you want payment before delivery and correct accounting, the proper instrument in most EU jurisdictions is an advance invoice (prepayment invoice), not a proforma.

An advance invoice is a real invoice: it is numbered, it triggers VAT on the prepayment, and it posts. Money received against it is not revenue — it is a liability, because you owe the customer goods or services. In the Lithuanian chart of accounts it lands in 4440, advances received:

Account	Debit	Credit
2410 Trade receivables	1,210
4440 Advances received		1,000
4492 VAT payable		210

When the goods are finally delivered, the advance is settled against the final invoice and the liability converts to revenue. This is the same deferral principle as adjusting entries: cash received for undelivered work is a debt, not income.

So the decision is really three-way:

• Proforma — the customer needs a document, but you want no accounting or tax consequence yet.
• Advance invoice — you want to be paid before delivery, with proper VAT and ledger treatment.
• Invoice — the supply has happened.

How Nordlet handles it

A sales invoice carries a type: invoice, credit_note, advance or proforma. That type determines what happens when it is issued.

Invoices, credit notes and advance invoices post to the ledger — they allocate a number from their own series, write the journal entries, create the receivable and enter the VAT return. Proformas do not post at all: they are issued, numbered in a separate series and can be sent as a PDF, but no ledger transaction is created, no receivable appears, and they never reach the VAT return or the i.SAF registers.

Because they don't post, proformas are also excluded from receivables reporting — they will not appear in aging reports or partner balances, which is correct: nobody owes you anything yet.

The practical flow is to issue a proforma, and when the customer commits, issue the real invoice (or an advance invoice if they are paying up front) as a separate document. Nordlet does not convert a proforma into an invoice in place, precisely because they are different documents with different numbering.

FAQ

Is a proforma invoice a legal document?

It is a commercial offer, not an accounting document. It can form part of a contract and is widely accepted for customs and internal approval purposes, but it is not an invoice under VAT law, creates no obligation to pay, and cannot be used to deduct VAT.

Do I have to pay VAT on a proforma invoice?

No. A proforma does not make output VAT due, and the recipient cannot deduct input VAT from it. If the supply has already happened, though, the VAT liability arises from the supply itself — issuing a proforma instead of the required invoice doesn't postpone it.

Can a customer pay against a proforma invoice?

Yes, and it happens constantly — that is what advance-payment proformas are for. But once the money arrives, the transaction needs a real document: either an advance invoice or the final invoice, depending on whether delivery has occurred.

What is the difference between a proforma and an advance invoice?

An advance invoice is a genuine invoice — numbered, VAT-triggering, and posted, with the prepayment recorded as a liability until delivery. A proforma is none of those things. Use an advance invoice when you want to be paid before delivery and account for it properly.

Does a proforma invoice need sequential numbering?

Not under VAT law, since it is not a VAT invoice. In practice a separate numbering series is worth using anyway — for internal traceability, and to make it impossible to confuse a proforma with a real invoice in either your records or the customer's.