A provisional invoice is usually contingent upon some type of action from the invoice receiver before a final invoice is issued. A provisional invoice therefore is not binding, but serves as an opportunity for adjustments by either party. If no action is taken on the provisional invoice, then it becomes null and void. There are few situations in which provisional invoices are helpful in business situations.
A provisional invoice is helpful in cases in which a third party will need to review an invoice before a final invoice is issued for payment The provisional invoice serves as a form of communication in such instances. For example, a hospital may send a provisional invoice to an insurance company for confirmation the charges on the invoice are covered. Upon confirmation, the hospital will issue the final invoice.
In many e-commerce transactions, a provisional invoice is issued electronically to the consumer to confirm the details of the transaction before generating a final invoice and taking payment. This serves to help cut down on fraudulent activity and mitigate the effects of buyer’s remorse. If the provisional invoice is not paid, it is annulled and there are no legal consequences.
In some cases a provisional invoice is issued to a purchaser to provide an estimation of charges related to a product, or more commonly a service or for fees. Such situations might include a government issuing a provisional invoice for taxes based on previous year’s earnings. This is adjustable in the event you made more or less than the previous year and once you report the difference the government will send a final invoice.
If a business needs to provide multiple quotes, the business may issue provisional invoices rather than quotes. In this case the customer simply pays the invoice that meets his needs and the rest are null and void. This cuts out having to send out a final invoice.