What Is Quotation in Business?

When you are competing with other companies to gain a business opportunity, the first point of comparison your customer will have to make will be the price. Through detailed quotes, you can inform your customer about your exact services, the prices charged, and all the other terms and conditions.

Below, we’ll cover:

  • What Is Quotation And How It Works?
  • What Is a Quotation Used for in Business?
  • Types of Quotations
  • Differences Between Invoice and Quotation
  • How to Create a Quotation?

What Is Quotation And How It Works?

Now let's get a little bit technical. A business quote in the strict definition is a document that describes the details of your goods, products, and services, along with their corresponding pricing and charges.

It is mostly used as a response to an inquiry by a potential customer or as part of the application to a particular business opportunity. While a quote is often used synonymously with an estimate or a proposal, it serves a specific purpose. It is used when the potential customer is yet to develop an interest in your products or services. It helps showcase your services and make an impression on your customer.

A proposal is more like a document that describes how you intend to solve a problem for the customer without any indications as to the accurate cost and charges involved. While both a quote and estimate serve a similar objective, an estimate is more of guesswork, and the final business costs may vary. A quote, on the other hand, gives accurate values on budget, cost, time duration, and other terms that can be legally binding.

A well-detailed quote will provide a clear picture of how the business transactions will look like and answers the questions ‘what,’ ‘ when,’ and ‘how much?’ with respect to your products and services.

What Is a Quotation Used for in Business?

Whenever a company or client wants to acquire certain products or services, they will first try to research available businesses that can provide them with the services they seek. And once companies are aware of a potential customer in need of their services, they will try to approach them in multiple ways.

In these scenarios, there is a need for a detailed document that can clearly state the various costs, duration of services, terms, and conditions that the business is ready to provide the client. And the client will go through the quote details and come to a conclusion about whether or not to make a deal with the company.

While estimates and proposals may be used in the initial phase of the business deals, quotations are the final clear cut documents that provide the exact terms and agreements that a company offers for a customer. The company must stick to the values presented in the quotation and make sure that the business deal is completed to perfection as agreed upon in the specified quotation. Thus quotes are also used as part of the legally binding contracts that two parties may get into.

Types of Quotations

Quotes can follow different templates depending on the purpose and the nature of the business.

Here are the most common types of quotations used in terms of goods transport and delivery.

  • Loco Price quotation - Specifies the loco price or the spot price of the cost of goods at the factory or the godown.
  • Station Price quotation - Specifies cost of carriage of goods from factory to station.
  • Free on Rail quotation - Cost of transporting the goods to the railway station nearest to the seller
  • Cost and Freight Price quotation- Specifies cost of goods and expenses like dock, loading charges, and freight
  • Cost insurance and Freight - The cost of insurance to cover the risks involved in the transportation of goods.
  • Franco Price - The cost to deliver goods at the doorstep.
  • Cash With order - specifies the amount to be sent along with the order.
  • Cash on Delivery - Specifies the cost to be paid after delivery.

Most sales quotes for intangible services contain details regarding the service level agreements, the subscription charges, the labor charges, duration of services, and other details.

Differences Between Invoice and Quotation

The fundamental difference between a quote and an invoice is that a quote is used in the beginning phase of a business deal, while an invoice is used to specify the list of products and services consumed once the deal is through.

A quote is a formal estimate with proper figures and values that help the decision-making process involving a business deal. But an invoice is a list of products and services that needs to be submitted to request the corresponding charges to be paid. An invoice is used only after the job has been completed.

How to Create a Quotation?

One cannot stress enough to make accurate and detailed quotes to help impress and inform your clients of the services you provide. But creating quotes need not be a nerve-wracking complex process. Once you have the necessary data and follow a systemized approach, creating quotes can be done instantly. Here are the steps to creating a quotation.

  • Choose a quote template that fits your purpose. You can also customize the quote template to include your business-specific details such as logo, company information, and add any custom fields as required.
  • Fill out the details in the quote. Add client information, quote number, date of issue, products and services offered, the terms and conditions, and any additional notes. Most quotes are considered valid 30 days from the date of issue. If not, specify the validity period as well.
  • Add all the optional details like the purchase order number, business number, discounts, sales tax number, and the signature section.
  • Proofread your finished quote and send it out to the customer in a formal way.

Quotes are an essential part of every business deal. But you cannot expend a lot of time to craft every quote you send out. Using pre-designed templates from WeInvoice is an efficient way to make the process much easier and smoother. Explore our wide variety of quote templates and get started.