Proforma Invoices (Quotations)

Before a sale is confirmed, the customer needs to know what they are buying, how much it will cost, and what taxes apply. A proforma invoice — also called a quotation — serves this purpose. It is a formal document that lists products, quantities, unit prices, and applicable GST, giving the customer a clear picture of the total cost before they commit.

A proforma invoice is not a tax invoice. It does not create any accounting entry, does not affect inventory, and does not appear in GST returns. It is purely a commercial document — a price offer with a defined validity period. Once the customer accepts, the proforma can be converted into a sales order or directly into a tax invoice, carrying all line item details forward automatically.

This chapter explains how proforma invoices work in Udyamo ERP Lite, covers the status lifecycle, and walks through creating, sending, and converting a proforma.

What You Will Learn

• The difference between a proforma invoice and a tax invoice
• When and why to use proforma invoices
• The proforma status lifecycle: draft, sent, converted, expired
• How to add line items with HSN codes, quantities, and tax rates
• How to send a proforma to a customer and download the PDF
• How to convert a proforma into a sales order or directly into an invoice

Prerequisites

• At least one customer record created (Chapter 20)
• Items set up in the item master with HSN codes and tax rates (Chapter 7)
• Understanding of the sales cycle (Chapter 19)

When to Use Proforma Invoices

Proforma invoices are appropriate in the following situations:

Price confirmation for custom work. A customer asks for a quote on 500 custom-machined gear housings. You calculate the cost, add your margin, determine the applicable GST, and send a proforma. The customer reviews, negotiates if needed, and confirms.

Tender or bid responses. When quoting against a requirement from a larger company, the proforma serves as your formal price offer.

Export transactions. Proforma invoices are commonly required for international shipments to support customs clearance, letters of credit, and advance payment processing.

New customer evaluation. Before starting a relationship with a new customer, a proforma establishes the commercial terms clearly and creates a documented starting point.

Tip: Even for repeat customers with established pricing, issuing a proforma for each order creates a clear audit trail and reduces disputes about what was agreed.

Status Lifecycle

A proforma invoice in Udyamo ERP Lite moves through the following statuses:

Draft ──> Sent ──> Converted
                └──> Expired

Warning: Once a proforma is converted, it cannot be edited or converted again. If terms change after conversion, modify the resulting sales order or create a new proforma.

Proforma Invoice Fields

Header Fields

Line Item Fields

Summary Fields

Step-by-Step: Creating a Proforma Invoice

This example creates a proforma for a customer who has requested pricing on machined steel brackets and mounting plates.

1. Navigate to Sales > Proforma Invoices from the main menu.
2. Click New Proforma Invoice.
3. Select the customer:
   • Customer: Sai Engineering Works
   • The billing and shipping addresses auto-fill from the customer master.
4. Set the dates:
   • Issue Date: (defaults to today)
   • Valid Until: Set to 15 days from today (or as per your quoting policy).
5. Add the first line item:
   • Item: MS Bracket Type A
   • HSN Code: 7308 (auto-filled from item master)
   • Quantity: 200
   • Unit Price: 450.00
   • Tax Rate: 18%
   • The system calculates: Tax Amount = 16,200.00, Total = 1,06,200.00
6. Add the second line item:
   • Item: Mounting Plate 6mm
   • HSN Code: 7326 (auto-filled from item master)
   • Quantity: 100
   • Unit Price: 320.00
   • Tax Rate: 18%
   • The system calculates: Tax Amount = 5,760.00, Total = 37,760.00
7. Review the summary:
   • Subtotal: 1,22,000.00
   • Tax Amount: 21,960.00
   • Total: 1,43,960.00
8. Add any notes (e.g., "Delivery within 10 working days from order confirmation. Prices valid for 15 days.").
9. Click Create Proforma Invoice to save as a draft.

Step-by-Step: Sending a Proforma

Once the proforma is saved, you need to communicate it to the customer.

1. Open the proforma invoice from the list.
2. Review the details one final time.
3. Choose one of the following:
   • Click Send Proforma to email the proforma directly to the customer's email address (as recorded in the customer master). The status changes from "Draft" to "Sent."
   • Click Download PDF to generate a PDF file that you can share manually via WhatsApp, email attachment, or print.

Tip: Even if you plan to share the PDF manually, clicking Send Proforma updates the status to "Sent," which provides a clear record that the quotation was communicated. You can also download the PDF after sending.

Step-by-Step: Converting a Proforma

When the customer accepts the proforma, you convert it into the next document in the sales cycle.

Converting to a Sales Order

1. Open the accepted proforma invoice.
2. Click Convert to Sales Order.
3. The system creates a new sales order pre-filled with:
   • The same customer
   • The same line items (items, quantities, prices, tax rates)
   • The same billing and shipping addresses
   • A reference back to the proforma
4. Review the sales order. You can adjust quantities, add expected delivery dates, or modify terms.
5. Save the sales order. The proforma status changes to "Converted."

Converting Directly to an Invoice

For simple, immediate sales where a separate sales order is not needed:

1. Open the accepted proforma invoice.
2. Click Convert to Invoice.
3. The system creates a new tax invoice pre-filled with all proforma details.
4. Review and adjust as needed (e.g., set the due date based on payment terms).
5. Save the invoice. The proforma status changes to "Converted."

Warning: Converting directly to an invoice skips the sales order step. This means you lose the ability to track partial deliveries and partial invoicing. Use direct conversion only for straightforward, single-delivery transactions.

Validity and Expiry

The Valid Until date defines how long the quoted prices are guaranteed. This is important because:

• Raw material costs fluctuate. A quote based on today's steel price may not be viable 60 days later.
• GST rates can change. A rate revision between quoting and invoicing would require a new proforma.
• Production capacity is finite. A quote for delivery in 2 weeks may not be achievable if the customer responds 3 months later.

If the validity date passes without the customer accepting, the proforma status can be marked as "Expired." You can then create a new proforma with updated pricing if the customer re-engages.

Tips & Best Practices

Tip: Standardise your validity period. Most manufacturing SMBs use 15 or 30 days. Shorter periods protect you from raw material price volatility; longer periods give customers more time to decide.

Tip: Include payment terms, delivery timelines, and any special conditions in the Notes field. This ensures the proforma serves as a complete commercial offer, not just a price list.

Tip: Track your quotation conversion rate (percentage of proformas that become sales orders). A low conversion rate may indicate pricing issues, slow response times, or misalignment with customer needs.

Warning: Do not use proforma invoices as a substitute for tax invoices. A proforma is not a legally valid document for GST purposes. The customer cannot claim input tax credit based on a proforma invoice.

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