Pro-forma Invoices - what are they and why do I need to pay it ?

Pro-forma invoices are sent out initially as we have been advised specifically by HMRC that as all our payments are due IN-ADVANCEof service provision, pro-forma is the correct accounting method.

HMRC Published Guidelines (since 1970)
If you need to issue a sales document for goods or services you have not supplied yet you issue a pro-forma invoice.

A pro-forma invoice IS a valid invoice requiring your payment.
A pro-forma invoice IS NOT a VAT invoice (you will receive one of those automatically on payment)

Some Frequently Asked Questions / Clarifications about ProFormas

What is a Pro-Forma ?

A proforma is a request for payment in-advance of delivery of service/product.

Why is it different to an Invoice ?

One is a request for payment *before* delivery and one is for payment *with or after* delivery - but they are essentially the same thing.
Think of it like this ...
In a restaurant you pay for the food after eating (you are invoiced) but in a take-away you pay for the food before-hand (you recieve a pro-forma, which is immediately changed to a receipt when paid - a receipt is a form of paid invoice - although you may get both as separate documents)

Why do we use Pro-forma Invoicing ?

  • It is industry standard (as well as for most services/products mandated by the regulators) that payment is made in advance of provisioning the service/product.
  • We have been specifically told by HMRC to use pro-forma invoicing.
  • Additionally the use of pro-forma invoicing allows clients to maintain greater control and self-service capabilities, and enables automated cancelations (of both service and pro-forma) in the event it is no longer required.
  • It reduces accounting requirements (by eliminating the need for credit-notes to cancel invoices)
  • Use of pro-formas makes the services and products cheaper for you.

When do I get a VAT Invoice ?

You get a VAT Invoice immediately on payment by email, on-screen viewable in the Client Portal and downloadable by PDF through the 'My Finances' section of the Client Portal for all services/products and a further copy with the item if ordering physical products to be delivered.

My accountant says pro-formas are illegal ?

Quite simply, they're wrong.
If you need an accountant who understands accounting standards that are over 40 years old now please get in touch and I'm sure we can recommend a local one for you.

My accounts-department is not allowed to pay pro-forma invoices ?

It may be your accounts-departments internal *policy*to try and gain credit where it is not permissable by attempting to not-pay a valid pro-forma invoice, but (unlike many claims we hear) it is not-illegal, or not-advised, or not-allowed.

Can you send me an invoice instead ?

You will automatically get a VAT Invoice on confirmed payment of the pro-forma.

What if I dont pay the pro-forma ?

Any existing service/product will stop working, and any newly ordered service/product will not be provisioned.
  • 6 Users Found This Useful
Was this answer helpful?

Related Articles

Can I have a VAT Invoice ?

Certainly ! You should have had an invoice sent to you automagically, as a PDF attachment, which...

Can I resell reseller accounts ?

Our web hosting control panels do not currently allow for sub-resellers. There are two options...

Can I pay monthly / quarterly / annually ?

With most of our packages a variety of payment terms are available.If in doubt or you have...

Do you charge VAT ? Who gets charged Value Added Tax (Sales Tax) ?

As a VAT registed UK Supplier, we are obliged by UK Revenue & Customs to charge VAT on all...

How do I order Addons like more IP Addresses, extra Bandwidth/Transfer, additional Disk etc.

Adding additional features to your existing Products and Services can be done online through the...

Powered by WHMCompleteSolution