Proforma Invoice vs Quotation: Key Differences Explained (with examples)
When you’re working with international clients, whether you’re freelancing, running an agency, exporting goods, or selling SaaS, you’ll keep running into two documents that look similar:
- a quotation
- a proforma invoice
Both mention scope, price, currency, and terms. But they’re used at different moments in the deal, and using the wrong one can create avoidable friction: delayed approvals, payment holds, mismatched documentation, or endless back-and-forth with the buyer’s finance team.
A simple way to think about it:
- A quotation is your offer (early stage).
- A proforma invoice is the pre-invoice (once the buyer is ready to proceed).
Let’s break it down clearly.
TL;DR
- Quotation = formal price offer sent while the client is still deciding.
- Proforma invoice = invoice-like document sent after agreement, often used for bank processing, import approvals, LCs, and advance payments.
- Neither is a tax invoice (in India, GST/accounting should rely on the final invoice/commercial invoice).
- If you’re dealing cross-border, sending a proforma at the right time makes payments smoother—because banks and buyer finance teams understand it better.
What is a quotation?
A quotation is a formal price offer you send to a prospective client before they commit. It answers: “What will this cost, and under what terms?”
Where a quotation sits in the sales cycle
A quotation typically comes after:
- initial enquiry / discovery
- scoping the work (or product specs)
- estimating cost and timelines
At this point:
- the buyer is comparing options
- your scope may still change
- no payment is expected yet (usually)
What a quotation usually includes
A clean quotation typically has:
- item/service description (and scope assumptions)
- quantity, unit price, total price
- currency
- validity period (e.g., “Valid for 15 days”)
- delivery timeline
- basic payment terms (advance/milestone/net days)
- exclusions (what’s not included)
Is a quotation legally binding?
Usually, a quotation is not a tax or compliance document. But once the buyer accepts it in writing, it becomes a strong commercial reference point, and is often converted into a purchase order, proforma invoice, or final invoice.
What is a proforma invoice?
A proforma invoice is a preliminary invoice issued after the buyer shows clear intent to buy, but before the final invoice (or commercial invoice for exports).
It looks like an invoice because it’s designed for operations—approvals, bank processing, and shipment planning—not just negotiation.
Why proforma invoices matter in international trade
In cross-border transactions, proforma invoices are commonly used by buyers to:
- get internal finance approval
- apply for import licenses (where applicable)
- open a Letter of Credit (LC)
- arrange foreign exchange / bank remittance
- estimate duties and landed costs (for goods)
That’s why many international buyers explicitly ask: “Please send a proforma invoice.”
What a proforma invoice usually includes
A proforma invoice typically includes everything a quote does—plus more “trade-ready” detail, such as:
- seller + buyer legal name and address
- PI number + date
- detailed line items
- HS codes (for goods)
- Incoterms (FOB/CIF/DAP etc.) for goods
- payment terms (advance, LC, milestones, credit period)
- delivery/shipping timelines
- bank/collection details
- validity date
- clear label: “PROFORMA INVOICE”
Is a proforma invoice legally binding?
It’s not a tax invoice. But commercially, once accepted, it’s treated as a near-final commitment on price, quantity, currency, and terms—especially in export workflows.
Proforma invoice vs quotation (side-by-side)
| Aspect | Quotation | Proforma Invoice |
| Stage | Early (buyer evaluating) | After agreement (buyer ready to proceed) |
| Purpose | Help buyer decide | Enable approvals + payment processing + planning |
| Format | Offer-style | Invoice-style |
| Detail level | Moderate | High (trade/bank friendly) |
| Used by banks/customs | Rarely | Often (LCs, FX approvals, shipment planning) |
| Payment trigger | Usually not | Often used for advance/milestone payment |
| Tax/GST status | Not a tax document | Not a tax document |
In simple terms: Start with a quotation to close the decision. Use a proforma invoice to move money (and goods/services) smoothly.
When should you use a quotation vs a proforma invoice?
Use a quotation when…
- scope is still being negotiated
- you’re giving options (basic vs premium, 2 timelines, etc.)
- buyer needs a quick estimate to decide
- the work hasn’t been approved internally yet
Example: A US client asks for a website build. You send a quotation with 2 packages, clear deliverables, and validity for 14 days.
Switch to a proforma invoice when…
- scope + price is agreed (email “Yes, go ahead”)
- buyer asks for a formal document to raise PO/approval
- buyer wants to pay an advance/milestone
- you’re exporting goods and the buyer needs PI for LC/import processes
Example: A buyer confirms order quantity + Incoterms. You issue a proforma invoice with HS code, shipping terms, and payment instructions.
How the flow works (quotation → proforma → final invoice)
A typical international workflow looks like this:
- Quotation (negotiation + decision)
- Buyer accepts / raises PO
- Proforma Invoice (finalised terms + payment readiness)
- Buyer remits advance / opens LC / pays milestone
- Delivery/shipment happens
- Commercial invoice / final invoice issued (for accounting/tax/shipping)
This sequence matters because banks and finance teams like consistency across documents.
Why this matters for payments + compliance (especially in India)
For Indian exporters and service exporters, mismatched documents can slow down incoming payments.
Common friction points:
- Buyer name differs across quotation/PI/invoice
- Currency changes without explanation
- Amount changes without a revised PI
- Missing payment terms or purpose/description clarity
- Goods exports missing HS code / Incoterms
A simple rule: Before you send the proforma invoice, ensure the buyer name, currency, amount, and terms are aligned with what will appear on the final invoice.
And once you receive funds in India, you’ll often need proper inward remittance proof (like FIRA/FIRC, depending on banking route) for audits, records, or export documentation flows.
Common mistakes (and how to fix them)
1) Asking for advance payment using only a quotation
Why it fails: buyer’s bank/finance team may ask for a PI or invoice.
Fix: once accepted, issue a proforma invoice immediately.
2) No validity date / unclear payment terms
Why it fails: approvals stall, and banks prefer explicit terms.
Fix: add validity + exact payment terms (e.g., “50% advance, 50% before shipment” / “Net 15”).
3) Switching currency between quotation and PI without clarity
Why it fails: creates confusion + compliance questions.
Fix: explain currency basis and rate logic (even a simple note helps).
4) Goods exports: missing Incoterms or HS codes
Why it fails: buyer can’t plan duties/shipping responsibility.
Fix: include HS codes + Incoterms on the PI (for goods).
5) Using a proforma invoice as a GST invoice
Why it fails: PI is not a tax invoice.
Fix: use the final tax/commercial invoice for GST/accounting.
Make the “getting paid” part simpler (without changing your client’s flow)
Once a proforma invoice is accepted, your next headache is usually: fees, FX markups, delays, and paperwork trails.
This is where export-focused payment rails help.
How Skydo fits
If you receive international payments as an Indian exporter/freelancer/agency:
- You can add Skydo’s USD/EUR/GBP local account details to your proforma invoice, so the client pays like a local transfer (e.g., ACH/SEPA where applicable).
- For US clients, you can also offer them card payment option via InstaLinks
- You receive INR with transparent pricing and without the “mystery” FX spread many businesses only notice after reconciliation.
- For each inward remittance, you get RBI-compliant documentation flow (so you’re not chasing banks later).
So your flow becomes: send quotation → issue proforma with payment details → get paid → documentation stays clean.
Is a proforma invoice the same as a quotation?
No. A proforma invoice and quotation can contain similar pricing, but the purpose and timing differ. The proforma invoice is typically issued when the buyer is ready to proceed and needs a more formal document.
Is a quotation legally binding?
Is a proforma invoice legally binding?
Can I ask for advance payment on a quotation?
