Quote vs Invoice: What’s the Difference?
As a small business owner, knowing the differences between invoice documents and a professional quote is critical. But if you don’t know the differences when it comes to relevant offerings, where do you start?
To help, we put together this guide that breaks down everything you need to know about quotes vs invoices. Keep reading to learn when each should get used, the benefits, and how the processes are broken down.
Table of Contents
What’s Included in an Invoice?
How Does the Invoice Process Work?
What Is a Quote?
A quote may also be referred to as a sales quote, price quote, or a quotation. It is a document that lists the precise cost of a job. The total cost of the project is broken out in this set pricing, along with the timetable, scope, and other information required to generate future invoices.
An estimate is only the beginning of a quote. A set price cannot be altered once it has been quoted without a new business agreement. You must go to the location and do any necessary preliminary research before submitting a quote to ensure accuracy.
Legitimate and formal quotes are always written and should contain the following pieces of information:
- Pricing for materials, labor, taxes, and any relevant discounts that are accurate
- Branding and logo for the business, name of the business, and contact details
- A formal salutation thanking the client for their time
- Line items for requested goods and services
- Additional ways to advise clients of pertinent offerings
The completion of a price quote shouldn’t be hurried. Make sure there are no grammatical, spelling, or typographical issues by checking it twice. In addition to coming off as unprofessional, this could cost you money if the quantity or amount is inaccurate (since a quote is a legally binding document).
When Should Quotes Be Used?
You should have a quote ready the same day a customer asks for one. This helps you take full advantage of the momentum and the client’s determination to see the project through.
Quotes typically fall into one of three categories:
- Estimates. A bid with an estimated cost may be required for projects with variable costs and/or unforeseen durations. These can include things such as labor or goods with market-dependent prices. It is anticipated that there won’t be much of a deviation from the initial estimate, whether it is positive or negative. The majority of estimates are part of larger proposals and rarely stand alone for a project. Estimates are not legally binding and do not have a set price, in contrast to a formal, written quote.
- A fixed price. This estimate gives potential customers a precise estimate of the project’s cost. These often entail goods or services with a predetermined budget, deadline, and labor costs.
- A request for quotation (RFQ). A company may submit an RFQ to several suppliers to request a quote for their goods and/or services. Because they are written in a particular style that has been specified by the sender, quotes produced in response to an RFQ are distinctive. A company may offer a template or particular format and favor fixed-price quotes. This is so because the main purpose of an RFQ is to assess vendors before making a purchase.
Quote Preparation Tips
Quotes that are precise and expertly done show credibility. They also enhance client satisfaction and assist in shielding a company from risky financial and legal situations. Here are some suggestions to bear in mind when writing a formal quote.
- Make sure you categorize and price each project component and always get a pricing or service quote in writing.
- Include a statement stating that if the scope shifts, a new quote is required.
- Obtain signatures from everyone before beginning work.
Always keep in mind that a quote is a binding contract and should be handled as such.
Benefits of Providing a Quote
There are many advantages to giving quotes to prospective clients in the proper manner. Here are a few examples:
- Avoid taking on more unpaid work
- Aids in determining the contract’s value
- Ensures that everyone is on the same page by breaking down what is required for the work.
- Allows for improved cash flow planning
- Creates a base minimum wage for work
- Provide insightful commentary on your pricing
A quote reassures consumers that you are operating a respectable business and are willing to put your remarks in writing. It also protects you in the event that a client fails or refuses to pay.
What Is an Invoice?
An invoice is a detailed list of the products or services you gave your customers. It is an after-sale payment demand that provides customers with a way to pay for the goods or services they have received.
An invoice lists the items that were delivered, the services rendered, and the overall sum that is owed. They can be transmitted electronically or on paper by using invoicing software. Additionally, invoices may be paid in whole at once or in installments.
What Is an Invoice Used For?
A commercial document with a timestamp used to itemize and record transactions is called an invoice. The invoice will outline the conditions of the contract and detail the means of payment that are permitted if something was purchased on credit.
Billing for one-time projects or regular services can both be done through invoices. They are typically utilized where there is a continuous engagement with the consumer to request payment.
What’s Included in an Invoice?
Legally binding invoices must contain a certain amount of information. At the top, it should be quite apparent to see the word “Invoice.”
As well, you must always provide the following details on invoices:
- Name, address, and phone numbers of everyone involved in the invoice
- A special identification number or code
- Description of the delivered goods or services Date of invoice issuance
- Date of Goods/Services Supply
- Payment amount due, including taxes and pre-agreed discounts
- The due date for payments
You could also provide some more information if it’s needed. For example, you could include:
- Terms of payment
- Costs for late payments
- Options for payment
- Number of purchase orders
For a faster turnaround, freelancers and contractors may also decide to include their PayPal, Venmo, or other payment provider information on the invoice. FreshBooks provides easy-to-use software that’s intuitive and powerful. You can even benefit from a step-by-step process that breaks down everything you need to create and send invoices.
How Does the Invoice Process Work?
The good news is that the invoice process is fairly simple and straightforward. Whether you front an organization or work for a small firm, the technique of invoicing is the same.
To put it simply and in a series of steps, the invoicing process works as follows:
- A customer consents to making a purchase of products or services.
- Services are provided, and goods are either sent or sold in person.
- An invoice lists the specifics of the sale as well as the parties involved.
- The customer receives the invoice.
- The client has a set amount of time to pay you after getting the invoice.
- The customer makes a complete payment, and the invoice is then reconciled.
- Customers could also ask for proforma invoices, another kind of sales invoice.
For a positive cash flow, the quote and invoicing processes are two independent systems that rely on one another. The good news is that modern technology has figured out how to speed up payments by streamlining these operations.
The first step is to automate manual operations. For quicker processing, almost all accounting-related processes can be digitized. One illustration of how accounting departments are adopting a less “hands-on” strategy to guarantee transactions are accurate and ongoing is the touchless invoice procedure. Minutes are spent accepting, scanning, approving, and paying invoices.
Understanding the difference between invoices and quotes is critical for a business transaction. When you send a final invoice, you can determine the payment method and the final costs. Plus, you’re going to outline the payment terms and the services requested, and any costs involved. Creating invoices doesn’t have to be a challenge for formal contracts.
Invoice software like FreshBooks allows for more accurate pricing for both a quote and an invoice and you can do everything in just a few clicks. Ultimately,
FAQs on Quote vs Invoice
What comes first quote or invoice?
A quote comes first, as it can act as a possibility of what might be included in a project and what it might cost the customer. The invoice is sent after the fact to outline payment and what was provided to the client.
How do I convert a quote to an invoice?
Converting a quote to an invoice is most easily done with accounting or invoicing software. FreshBooks provides the tools and solutions you need to make this process as easy as possible.
Is an invoice a quote or an estimate?
Before any work is done, a quote is always provided. It provides information about the costs of a job or project, as well as the goods or services required. After the work is finished and payment is required, an invoice is issued. It also includes all the information from the quote.
Is a quote a legal document?
A quotation outlines your conditions of service and the price you will charge your consumers. Your quote turns into a contract after a client accepts it. Creating quality quotes can benefit your company greatly.