Proforma invoice vs Receipt: what each one is for
Proforma invoice versus receipt: one comes from the seller, the other from the seller; one sits at stage 4 of the flow, the other at stage 8. Below is the comparison table, the deciding difference, where each sits in the sequence and what goes wrong when they are confused.
Side by side
| Proforma invoice | Receipt | |
|---|---|---|
| Issued by | the seller | the seller |
| Sent to | the buyer | the buyer |
| Stage in the flow | 4 — preliminary bill | 8 — proof of payment |
| What it does | shows the buyer what the final invoice will look like, often to arrange prepayment, a letter of credit or import paperwork | proves that payment was made, how much, when and by what method |
| Commitment | not binding | acknowledges payment |
| Requests payment? | no | no |
| Proves delivery? | no | no |
| In the accounts | not booked as a sale; no tax point is created | closes the receivable for the seller and supports the buyer's expense claim |
| Lifetime | usually valid until the stated date or until the real invoice replaces it | permanent proof of payment |
| Make one with | Invoice Maker | Invoice Maker |
The deciding difference
A proforma asks for money before delivery; a receipt confirms money after it arrived. Buyers who prepay against a proforma often ask for a receipt as proof, and sellers should issue one, because the proforma itself proves nothing about payment and the final invoice may not exist yet.
If you remember one thing, remember the sender and the stage. The proforma invoice is the seller's document at stage 4 (preliminary bill); the receipt is the seller's document at stage 8 (proof of payment). Everything else in the table follows from those two facts.
Where each one sits in the flow
The proforma invoice is issued at stage 4 and the receipt at stage 8 of the eight-step order-to-cash sequence. The steps between them, if any, are the documents that normally connect the two:
- 4. Proforma invoice (this page) — A preliminary invoice sent before delivery, used for prepayment and customs, not for the books.
- 5. Delivery note — What was in the box, signed for by whoever received it.
- 6. Invoice — The bill: what was supplied, what is owed, by when, and the tax on it.
- 7. Credit note (if needed) — A negative invoice that cancels or reduces an earlier one.
- 8. Receipt (this page) — Proof that an invoice was paid: amount, date and method.
Steps before the proforma invoice and after the receipt are on the business documents hub, which shows the full eight-step sequence with a checklist for every document.
Worked scenario
The machinery importer pays $38,000 against proforma PF-0044. The seller issues receipt RCP-2290 for the amount, the date and the bank reference. Two months later the final invoice is raised showing the advance. The importer's file has three documents that tell the whole story: what was asked for, what was paid, what was finally billed.
Can one replace the other?
Because the proforma invoice shows the buyer what the final invoice will look like, often to arrange prepayment, a letter of credit or import paperwork and the receipt proves that payment was made, how much, when and by what method, one cannot stand in for the other. What you can do is reference one on the other, which is exactly what the numbering section below is for.
Numbering and matching
Numbering is where the two connect. Proforma invoice numbers: Numbered separately from real invoices, and clearly labelled 'proforma', because it must not enter the sales ledger or a tax return. Receipt numbers: Numbered, and it names the invoice or sale it settles. Quote the earlier number on the later document every time; it is a two-second habit that removes most matching queries.
Common mistakes
Two habits cause most of the trouble. First, recording a proforma as revenue or claiming tax on it, when it is not a tax invoice. Second, using an invoice marked 'paid' as the receipt without stating the date and method of payment. Each is avoidable with a template that carries the right fields and a rule about which document comes first.
Checklists: what to include in a proforma invoice and what to include in a receipt.