Proforma Invoice vs Invoice for IT Services: When to Use Each
A new client in Berlin has agreed to a fixed-price milestone and asks you for "an invoice for the 50% prepayment". No work has started, your accountant says a real invoice would create a receivable and possibly a VAT liability today, and the client's procurement team needs a document to approve before any money can leave their account. What they need is a proforma invoice. On paper it looks almost identical to a regular invoice. In your books the two behave in completely different ways.
What a proforma invoice is, and what it is not
A proforma invoice is a formal quotation dressed as an invoice. It shows both parties' details, the services, the amounts, the currency, the VAT treatment and the payment terms, says "proforma" in the title and carries its own number series. Its job is to tell the client exactly how much to pay and what the final invoice will look like.
What it is not: an accounting document. A proforma creates no receivable, no revenue and no VAT liability. It is not a tax invoice in any EU country, and it does not start the legal payment-terms clock. If the client never pays, you let it expire. Nothing needs to be cancelled or credited.
A final invoice is the opposite. Once issued, it is a legal and tax document. It records a receivable in your ledger, recognizes revenue (or deferred revenue, for prepayments), and in most EU countries makes VAT chargeable on the invoice date or the payment date, depending on local rules. Once posted, it cannot be quietly changed. Corrections happen through a credit note.
When to send a proforma
- Prepayments and deposits. You want money before the work starts. A proforma asks for it without booking revenue for services you have not yet delivered.
- New clients. First engagement, no payment history. The proforma sets expectations: bank details, currency, who pays the transfer fees, VAT position.
- Cross-border work. A client abroad may need to open a vendor record or approve an FX budget before a final invoice can be processed. A proforma gives them something to work with.
- Clients who ask for "an invoice to approve". Larger companies need a document to attach to a purchase order. Send the proforma, receive the PO number, then invoice against it.
Do not send a proforma when the work is done and accepted. The receivable exists, and the right document is a final invoice with a due date.
Why a proforma never touches the ledger
Double-entry accounting records obligations. An invoice says "the client owes us EUR 3,000": debit receivables, credit revenue or deferred revenue. A proforma says "if you agree, this is what you would owe". There is no obligation yet, so there is nothing to post.
This matters in three concrete ways. First, revenue: booking a proforma as revenue would overstate the month's P&L, and an auditor would ask you to reverse it. Second, VAT: in most EU jurisdictions VAT becomes chargeable at the time of supply or at the time of payment, and a proforma is neither. Third, receivables aging: proformas in the receivables ledger would show "overdue" amounts that were never legally due, and you would chase debts that do not exist.
The practical rule: a proforma lives in the sales pipeline, not in the books. It becomes an accounting event only when it converts into a posted invoice. In TridentERP a proforma is a separate document type that never posts to the ledger, so the trial balance never sees it.
How a proforma converts into a posted invoice
The typical flow for a services company looks like this:
- Send the proforma. Ask the client to quote the proforma number as the payment reference.
- The client pays, in full or in part. The bank statement shows the money and the reference, and you match it to the proforma.
- Issue the final invoice. Copy the lines from the proforma, give it a number from the invoice series, and date it on the day the payment arrived (for a prepayment invoice) or the day the service was delivered (for a delivery invoice).
- Post the invoice. Now the receivable exists, and the payment you already hold settles it immediately.
- Reference the proforma on the invoice ("as per proforma PF-2026-014") so the client's accounts payable team can match the two documents.
Where a deposit is paid and the rest is due later, you issue two invoices: a prepayment invoice for the deposit, and a final invoice for the full amount showing the deposit as already paid. That is the pattern in the worked example below.
VAT, numbering and what clients expect
Numbering
Keep proformas in a separate sequence (PF-2026-001, PF-2026-002) and never give a proforma a number from the invoice series. EU tax authorities expect invoices to be sequential without gaps, and every expired proforma would leave a hole you would have to explain. The proforma number may appear on the final invoice as a reference, but the invoice gets its own number.
VAT
Show the VAT treatment on the proforma exactly as it will appear on the invoice, so the client is not surprised later. For B2B services from one EU country to a business in another EU country, the usual position is reverse charge: no VAT charged, both VAT numbers on the document, and a note such as "VAT reverse charged, Article 196 of Directive 2006/112/EC". For a US business client, an EU supplier generally charges no VAT on services, and you keep evidence that the client is a business (a company registration or a signed contract).
A prepayment complicates timing. In most EU countries, receiving a prepayment makes VAT chargeable on the amount received, which is why the prepayment invoice should be dated on the day the money arrives, not weeks later. The proforma itself never triggers VAT.
EU and US expectations side by side
| Item | EU client | US client |
|---|---|---|
| The word "proforma" | Widely understood; often expected before a purchase order | Less common; label it "Proforma invoice" and say it is for payment approval |
| Tax identifiers | Both VAT numbers, reverse-charge note | No VAT number; you may be asked for a W-8BEN-E form |
| Bank details | IBAN and BIC; state the currency (usually EUR) | SWIFT details; expect wire fees to be deducted unless agreed otherwise |
| Format | PDF for most SMEs; EN 16931 or Peppol for public bodies | PDF, often uploaded to an AP portal; a PO number on the invoice |
| Payment terms | 14-30 days from the invoice date | Net 30 is normal; Net 45-60 with large companies |
Worked example: a EUR 6,000 milestone with a 50% prepayment
Your agency in Krakow agrees a fixed-price milestone of EUR 6,000 with a client in Amsterdam. Both companies are VAT-registered, so reverse charge applies. Terms: 50% before work starts, 50% on acceptance.
Day 1. You send proforma PF-2026-014 for EUR 3,000, reverse charge, valid for 7 days. Ledger: no entry. Pipeline: milestone waiting for prepayment.
Day 5. EUR 3,000 lands on the bank statement with the reference "PF-2026-014". You issue prepayment invoice INV-2026-087 dated day 5 for EUR 3,000, referencing the proforma. Ledger: debit bank 3,000, credit contract liability (deferred revenue) 3,000. No revenue yet, because nothing has been delivered. VAT: reverse charge, nothing to pay, but the invoice goes on your EC sales list for the period.
Day 30. The milestone is accepted. You issue final invoice INV-2026-102 for EUR 6,000 with the line "less prepayment per INV-2026-087: EUR 3,000" and a balance due of EUR 3,000. Ledger: credit revenue 6,000, debit contract liability 3,000, debit receivables 3,000.
Day 52. The balance arrives. Debit bank 3,000, credit receivables 3,000. The milestone is closed and the client statement shows a zero balance.
At no point did the proforma create a ledger entry. Had the client walked away on day 3, you would have marked the proforma as expired and moved on. Had EUR 2,975 arrived because their bank took a fee, the prepayment invoice would show 2,975 and the final balance 3,025, with no correction document.
FAQ
Can a client pay against a proforma invoice?
Yes, that is its main purpose. You then issue the tax invoice for the amount actually received, dated on the day of receipt.
Does a proforma need a number and a validity date?
Yes. A number from its own series lets you match the payment, and a validity date (7-14 days is typical) tells the client when the quoted amount or FX rate expires.
Can I edit a proforma after sending it?
Yes, because it is not posted anywhere. Reissue it with the same number and a new date. A posted invoice is different: it is corrected only through a credit note.
What to do next
- Set up two number series in your invoicing tool: one for proformas, one for invoices, and never mix them.
- Write a proforma template that already states the VAT position, bank details and the payment reference you want the client to use.
- Decide a prepayment policy for new clients and fixed-price work (30-50% up front is common) and put it in the contract.
- Agree who converts a proforma into an invoice and when: on the day the money arrives, not at month end.
- Check that your accounting setup keeps proformas out of the ledger. If you want to see how this works in practice, the TridentERP demo tour shows proforma invoices, client invoices and credit notes on a single double-entry ledger.
