I would like to revisit the proforma invoice vs. tax invoice. I sell goods to companies some larger businesses or sometimes universities. Now I'm partly an online business but is not restricted to just online as some of my transactions are also offline.
In most cases I will produce a proforma invoice for payment first before a product will be shipped to the customer or picked up. I'm not a stock holding company and thus have to pay my suppliers when I pick up the product.
Some of these clients insist on Tax Invoices before they will make a payment which puts me in a dilemma and where I had an issue before with SARS when a potential client requested a tax invoice for a massive quote that was done, took the tax invoice and claimed the VAT before I received any payment or any goods was ordered. And believe me you can show that you issued a credit note because the tax invoice was never paid, SARS is not interested in that because they've paid money out on a legal and binding tax invoice and wants to recover that output tax from you, which you never received. I had to hire top tax lawyers to get SARS of my back and show them that the potential client committed the fraud and I wasn't in on it (I think SARS refers to it as foul play).
Now I understand that a proforma invoice is not a legal and binding document but it also puts my business at risk of issuing tax invoices and not getting any payment for it. In actual fact SARS told me that I should not issue any tax invoices if I have not received payment, rendered services or a product has been delivered, the latter I'm not prepared to risk without payment.
I get into big fights with finance departments which seems to me like a loophole in the VAT system for fraudsters, I might be wrong.
I want to ask the clever accountants here what can I do in a situation like this, believe me I don't want another SARS visit.
What is the difference between a Sales Order and Proforma Invoice?