Accounts Payable
Accounts Payable -Purchase Ledger Services
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What are pro-forma invoices and why are they used?

A pro-forma invoice shows a description of the goods to be sold, quantity and price.  However, it is not a VAT invoice and CANNOT be used to reclaim VAT.  It should be clearly marked: "This is not a VAT invoice". 

The pro-forma invoice does not have a tax point date and (usually) does not have an invoice number, so this invoice does not form part of the accounting records.     

Why do Suppliers Issue Pro-Forma Invoices?  

Example 1

A pro-forma invoice may be raised when a supplier is effectively providing a quotation to a customer.  

For example, a new customer wants to buy goods and wants to receive them quickly.  This means that the supplier does not have time to do a proper credit check.   However, the supplier also does not wish to sell goods on credit to an unknown customer, for fear of suffering a bad debt.   

Rather than lose the sale, the supplier may request payment up- front and issue a "pro-forma" invoice.  This means that the supplier does not include the sale in its accounting records and does not have to include the sale in its VAT Return.  

The sale will not be deemed to have taken place until payment has been received. Only then will the supplier need to account for VAT in its records and issue a VAT invoice to the customer.  

Example 2

A pro-forma invoice may be raised in respect of a renewal notice, such as a subscription to a magazine.   

The supplier will send a pro-forma invoice before the subscription is due to expire to ensure there is no interruption to the supply of magazines.  Once payment has been received, the supplier should issue a tax invoice with an invoice number and the tax point date.     


Accounts Payable staff must be careful that they do not enter both the pro-forma and the tax invoices onto the accounting system - this would be double-counting and there is a risk that the supplier could be paid twice.  

This can be avoided by keeping all pro-forma invoices in a "pending" file and removing them only once the tax invoice is received.  

Created by: The Accounts Payable Team
Company: The Accounts Payable Team
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