Quotation vs Proforma Invoice vs Invoice: What's the Difference?
A quotation offers a price and terms. A proforma invoice presents proposed transaction details in an invoice-style format, often for advance payment or import arrangements. An invoice is the formal billing document. They can belong to the same sale, but they serve different purposes and aren't interchangeable.
What is a quotation?
A quotation tells the buyer what you propose to supply and what it will cost. It typically includes seller and buyer details, item descriptions, quantities, unit prices, totals, payment terms, delivery terms and a validity date.
Use it when a buyer asks for a price or needs to compare offers. Make the scope clear: does the price include shipping, installation or taxes? State any assumptions so both sides understand what accepting the quote means.
Whether a quotation becomes binding depends on its terms, acceptance and applicable law. Don't assume every quotation is either automatically binding or completely non-binding.
Start with the free quotation maker or quotation template.
What is a proforma invoice?
A proforma invoice is a preliminary document, not the final invoice. The U.S. International Trade Administration describes it as “a quote in an invoice format.” A buyer may use it to apply for an import licence, open a letter of credit or arrange a currency transfer.
Source: International Trade Administration.
Businesses also use proforma invoices to present payment details before supply, such as when requesting an advance. Clearly label the document “Proforma Invoice” so the buyer doesn't mistake it for a tax invoice.
For example, UK HMRC guidance distinguishes proforma invoices from VAT invoices and recommends wording such as “This is not a VAT invoice.” That is UK guidance; follow your own country's requirements.
Source: HMRC guidance.
Use the proforma invoice generator or proforma invoice template.
What is an invoice?
An invoice formally bills the buyer for a transaction. It identifies the goods or services, amounts and relevant payment details. It isn't the same as a receipt confirming payment.
Tax-invoice requirements and issue dates depend on the country, transaction and tax status. Don't assume you should always wait until delivery or payment before issuing one.
For example, India's CGST Act section 31 sets invoice timing requirements for registered suppliers of taxable goods, including before or at removal where goods move for supply. Services have separate timing provisions. GST is India-specific, not a worldwide invoice requirement.
Source: CBIC, CGST Act section 31.
Try the invoice generator, or the GST invoice generator for relevant Indian transactions.
Compare the three
| Document | Main purpose | Typical use |
|---|---|---|
| Quotation | Offer prices and terms | Before the buyer commits |
| Proforma invoice | Present preliminary transaction details | Advance-payment or import arrangements |
| Invoice | Formally bill the transaction | At the stage required by the deal and applicable law |
A proforma is not a substitute for the tax invoice required by local law. Nor does every sale need a proforma: some transactions go directly from quotation to invoice.
A fictional example
A trading business quotes for 200 steel brackets, with a stated price validity and 50% advance-payment terms.
The buyer accepts and requests a proforma invoice for its payment process. The seller prepares it using the agreed items and terms, then issues the proper invoice at the stage required by local rules.
If dispatch documents are needed, the business prepares its packing list or delivery challan separately. These describe the shipment or movement; they aren't stages in converting the quotation into an invoice.
How this works in eazmybiz
eazmybiz supports these document conversions:
- Quotation to proforma invoice or invoice.
- Proforma invoice to tax invoice.
- Purchase order to purchase bill.
Product datasheets, packing lists, delivery challans and gate passes are also available. Dispatch documents are created separately. eazmybiz is business-document software, not accounting software.
Choose the document that matches the buyer's request and the transaction stage. Before issuing it, check quantities, prices, payment terms and applicable tax details rather than assuming a conversion makes every field correct.
This guide is general information, not tax or legal advice. Check local requirements with your tax authority or adviser.