Quotation, proforma invoice and tax invoice are often used interchangeably. They are not the same, and mixing them up leads to confused customers and messy books.
Quotation
A quotation is an offer. It tells the customer what you will supply and at what price. It is not a demand for payment, and the customer can accept, negotiate or walk away.
Proforma invoice
A proforma invoice is a preview of the final bill. Businesses use it when a customer needs something to arrange payment, a purchase order or an import clearance before the goods ship. It is not a tax invoice.
Tax invoice
The tax invoice is the real document. It records a supply and carries the tax details. You issue it when the sale happens, following the tax timing rules that apply to you.
How they connect
- Send a quotation from the customer record.
- When the customer accepts, convert it into an order or proforma if they need one.
- Issue the tax invoice, then send a receipt when payment arrives.
When all three are created from the same record, the prices and customer details never drift apart.
Rules change and every business is different, so please confirm the details with your chartered accountant.