Most agencies use four or five names for the documents they send about money, and use them loosely. A quote gets called a proforma, a proforma gets paid as if it were an invoice, and a receipt is sent when the client actually needed a corrected bill. None of this feels serious until a client's finance team sends something back, or a VAT return has to be reconciled against documents that do not say what they are.
The fix is not complicated. Each document has one job. Knowing which job you are doing tells you which document to send, what goes on it, and whether it counts as a sale.
This is general information, not tax advice. The VAT points follow the Federal Tax Authority's rules as summarised in the UAE VAT invoicing guide on this site; check tax.gov.ae or an adviser for your own situation.
The quotation: a price offered
A quotation says what the work will cost if the client agrees. It is an offer, not a demand for payment, and it books nothing in your accounts. Nobody owes anyone anything because a quote exists.
Write it in the same words the scope will use, line by line, so that when it becomes an invoice the client's finance team can match one to the other without asking. Give it a validity period, because a price quoted in January and accepted in June is a price you may no longer be able to honour.
Quotations are worth numbering in their own series, separate from invoices. If QUO-014 is never accepted, that should not leave a gap in the invoice run, where a missing number looks like a missing invoice.
The pro forma: a preview of the bill
A pro forma invoice looks like an invoice and is still an offer. Its usual purpose in the Gulf is practical: a client's procurement team needs a document shaped like the final bill to raise a purchase order, release a budget or pay a deposit before work starts.
It is not a tax invoice, and it confers no right to reclaim input tax. If you are VAT-registered, it is sensible to show the VAT the client will pay, because they are budgeting from it, but that figure is an estimate on a document that does not carry tax status. Say so on the page.
A pro forma is how a client gets ready to pay. It is never the document they pay against.
The VAT invoicing guide lists this as one of the mistakes that gets invoices sent back: a proforma or quote used as the invoice the client pays against. If a client pays from the pro forma, the next step is still an invoice.
The invoice and the tax invoice
The invoice is the demand for payment. It books revenue and creates a receivable. In the UAE, which one you issue depends on your registration, not on the client.
- A plain Invoice, if the agency is not VAT-registered. It carries no VAT anywhere. Charging VAT, or calling a document a tax invoice, while unregistered is itself the problem.
- A Tax Invoice, if the agency is registered. It charges VAT at 5% and must show the details the FTA prescribes, including both TRNs, a sequential number, dates, the VAT rate and the VAT in AED.
- A Simplified Tax Invoice, with fewer details, when the client is not VAT-registered, or when the client is registered and the supply is worth AED 10,000 or less.
Timing matters too. A registered supplier issues a tax invoice generally within 14 days of the date of supply, and for a service that date is usually the earliest of completing the work, receiving payment or issuing the invoice. That is the detail agencies miss with deposits.
Deposits paid against a pro forma
Here is how it tends to go. As an example, an agency sends a pro forma for AED 40,000 plus VAT for a launch campaign, and the client pays a 50% deposit against it in the first week. The work finishes a month later, and the agency invoices the full amount at the end.
The problem is that receiving payment can fix the date of supply for the part that was paid. The pro forma did not account for that VAT, because it is not a tax document. The cleaner path is to issue a tax invoice for the deposit when it is received, and a second tax invoice for the balance when the work is done. Two invoices, each matching money that actually moved.
The receipt: money acknowledged
A payment receipt confirms that money arrived against an invoice. It adds no new revenue, because the invoice already booked it. Counting both is how an agency's dashboard shows twice the income it actually earned.
Receipts are useful for clients who pay in cash or by cheque, for creators and suppliers who need proof of payment, and for any finance team that asks for one. A receipt should name the invoice it relates to, the amount received, the date and the method. Without the invoice reference it is an amount with no story.
The credit note: money given back
Once an invoice has been sent, it should not be edited or reissued. If the fee is reduced, part of the work is cancelled, or an amount was simply wrong, the correction is a credit note that refers to the original invoice.
For a registered agency correcting a tax invoice, that means a tax credit note, which reverses the VAT as well as the amount and needs similar details to a tax invoice, including the value of the change and the VAT adjusted. It subtracts from revenue, so your books show what the client will really pay.
A simple rule for choosing
- The client is deciding: send a quotation.
- The client has agreed and needs a document to raise a purchase order or pay a deposit: send a pro forma, and follow it with an invoice.
- Money is owed: send an invoice, or a tax invoice if you are registered.
- Money has arrived: send a receipt if one is needed, naming the invoice.
- The amount owed has gone down: send a credit note that names the invoice it corrects.
Only two of these count as sales: the invoice, and the credit note that reduces it. Keeping that straight is what makes revenue, receivables and the VAT return agree with each other.
The free quotation and invoice generators on this site make each of these documents with the right title, numbering series and VAT treatment, and they are the same documents Wiro produces inside the agency, so a quote accepted by the client can become its invoice without being retyped.
