Should I send my customer a quote or a proforma invoice?

Before an invoice is finalised, it’s common that a business will have sent their customer preliminary documentation, either in the form of a proforma invoice or a quotation. However sometimes, it can be a challenge to know which is more appropriate to provide.

This article puts these concerns to rest. It distinguishes these two documents, gives you a timeline for when each should be used within the sales process, and explains how SumUp Invoices can help you create these documents with its quotation and proforma invoice templates.

What’s the difference between a quote and a proforma invoice?

The fundamental difference between a quotation and a proforma invoice is whether or not a payment is to be expected from the customer. 

When a quote is issued by the seller, it’s not expected that the customer will necessarily accept it. After all, the purpose of giving a quotation is to inform the customer of the price so they can decide if they want to proceed.

However, a proforma invoice is considered to be a ‘done deal’. It’s a preliminary bill of sale that the buyer can have from the seller ahead of receiving the goods or services.

When should I send a quote?

A quote should be sent as soon as possible after your client has contacted you to request it. They are sent early on in your communication with your potential customer who will likely shop around to see what different companies will charge for their products or services.

Remember that a quotation is used when it’s only possible that your customer is going to agree to the purchase. Only once the quote has been accepted, may it then be appropriate to issue your customer with a proforma invoice.

When should I send a proforma invoice?

You should send a proforma invoice once the prices have been agreed. A proforma invoice is often used in international trade. It can be used by the buyer when they apply for an import license, open a letter of credit or make arrangements for funds. Naturally, this therefore means that the overall details of the sale have been sorted. There should no longer be any questions regarding the prices.

However, of course, as a proforma invoice isn’t a valid document that can be used in business accounting, the final details need to be confirmed with a valid invoice. You can’t make a payment with a proforma invoice. 

Using a quotation template with invoicing software

Creating a quote is very easy if you’re using invoicing software. Normally, it will provide you with a simple template with the necessary fields you need to fill out.

Unlike an invoice, a quotation doesn’t have formal requirements. It’s therefore up to you how you provide your customer with a quote. But still, as the aim is to answer their inquiry and explain what they’re agreeing to if they accept, it’s important you include your prices, your company details, their details and an expiration date, i.e., how long the quote is valid for.

To create your quote with SumUp Invoices, simply select ‘Quotes’ from the sidebar and tap ‘New Quote’. Then just fill in the form and click ‘Complete Quote’.

Once your quote has been made, you can then confirm whether it has been accepted by your customer. If your customer agrees to the prices quoted, you can click ‘Accepted by Customer’ and then ‘Convert to invoice’. The information from the quote will then be copied to an invoice template, from which you can create either a finalised invoice or select to send a proforma invoice to your customer.

Using a proforma invoice template with invoicing software

Your proforma invoice template is likely going to be the same as a normal invoice template. After all, as the proforma acts like a draft invoice, it’s going to need to contain the same information. The only difference is that rather than having an invoice number and the title ‘invoice’, your proforma invoice doesn’t require a unique invoice number and is going to be labelled as ‘proforma’.

Summary

• A quote is normally sent early on in your communication with your customer.

• A quote isn’t a done deal and there is no expectation of payment.

• A proforma invoice is sent after the prices have been agreed upon.

• Even though a proforma invoice is sent when payment is expected, payments can’t be made on it and it needs to be converted into a finalised invoice.