If you’re running a service-related business, you’re probably used to issuing a quote and an invoice. Looking at these two types of documents, you might find a few striking similarities.
That’s why it’s unsurprising that many people confuse one over the other. From a business and accounting perspective, these two serve different purposes.
Finding out these differences and knowing when to issue an invoice or quote help make your business more professional.
What Is a Job or Price Quote?
When a customer asks a company for specific services, the firm should be able to provide an estimate based on the materials and work requirements.
Job quoting software, like this free template from Jobber, can help businesses issue customized service cost estimates quickly and efficiently.
A price quote lets customers know how much they’re going to pay for a specific project. This means it must be handed out to a client before the start of a project.
Companies often issue a price quote after conducting an inspection and speaking with the customers about their requirements. (1)
What’s in A Price Quote?
Issuing a job cost estimation keeps your business professional, which can help you attract new clients through referrals.
Entities must consider several factors before crafting a good job price quote template. Most of the details will depend on the type of service your company provides.
However, a detailed quote is your best shot at getting protected from potential legal risks and further obligations as an itemized list of services and product inclusions are reflected in the document. (2)
Apart from showing your brand identity, a formal quote can include the following details:
- General business information
- Accurate listing of materials required and labor costs, including taxes and discounts
- A list of services included in the costs
- Optional services offered and their corresponding fees
- Estimated work period and validity of the quote
- Payment options, including terms and conditions
- Customer’s signature (1) (2)
A service quote is essential in creating a positive impression for your business, and care should be taken with getting them right every time. (1)
When to Issue a Service Quote
A service quote is issued before your team starts working on a project. This business document is often used when your business is clear about the project’s requirements, the costs are stable, and additional works aren’t too complex to perform.
A quote, however, can be amended as your customer’s requirements change. (3)
What Is an Invoice?
An invoice indicates the amount payable by the client and shows when they must pay for the products and services owed and how.
The difference between a quote and an invoice is that the latter is a more reliable basis for collecting payments because it shows the products and services delivered to the client.
This makes invoices less flexible than quotes.
While the prices stated in a service price quote can change based on the fluctuations in material costs and service requirements, the charges reflected on the invoice are often non-negotiable.
They may even inflate if the client doesn’t pay on time.
What’s in An Invoice?
Like a job quote, an invoice should reflect the following information:
- Reference number
- Your company information
- Customer information
- Payment due date and terms
- Costs including taxes and interests
(1) (4)
Besides indicating the accepted payment methods, your invoice must specify late payment policies if a client fails to pay on the expected date.
Stating your policies on charging late payments helps your clients understand how much you charge for not paying on time. (1)
When Should an Invoice Be Issued?
Conversely, an invoice is sent after the transaction or service has been completed, ideally within two days following project closure. This provides your client with ample time to pay and review the statement. (1)
Can a Quote Be Used as An Invoice and Vice Versa?
As the two documents serve two different purposes, they can’t be used interchangeably. A quote must be submitted before the start of any project or halfway through when materials and services are added from the initial estimation.
On the other hand, you must only provide an invoice after the product or service delivery.
Ideally, the price on the quote and the invoice should match. If changes to the works are provided, a company must submit an amended version of the price quote before sending an invoice. (1)
The Bottom Line
Besides providing top-notch solutions, service providers must rely on accurate job pricing and efficient billing services to grow their enterprise.
The issuance of price quotes and invoices ensures that a business stays professional and that it has a steady cash flow.
Without these critical activities, a firm may be dismissed as unprofessional and disorganized, negatively impacting its brand.
References
- “Quote vs. Invoice: What Is The Difference”, Source: https://www.businessnewsdaily.com/16026-quote-invoice-difference.html
- “What to include in a quote”, Source: https://www.business.qld.gov.au/running-business/marketing-sales/sales/preparing-quote/include
- “Price lists, estimates, quotations and tenders”, Source: https://www.infoentrepreneurs.org/en/guides/price-lists–estimates–quotations-and-tenders/
- “Invoice”, Source: https://www.investopedia.com/terms/i/invoice.asp
Jonathon Spire
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