Quotes and invoices are documents that ensure a business gets paid for the work it has done. They are critical to a business's financial health and success. However, they have different uses in the procure-to-pay process, mainly in terms of timing, which we'll explore in this article.

Understanding the Difference Between Quotation vs. Invoice

The primary difference between a quote and an invoice is the delivery time and the information on each detail. Understanding the differences between the two is key to effectively employing them in your business.

What is a Price Quote?

Price quotes are issued before a project starts or before the delivery of goods and services. It details the project's projected costs, identifying its timeline, scope, and details needed to invoice later.

Once a fixed price is quoted, it can only be changed with a new business agreement. Formal quotes are always in writing and include accurate pricing for materials, labour costs, and taxes. They should also include company branding and its logo, contact information, a professional greeting thanking the customer for their time, and a line item of the services requested. Additional options to inform customers of relevant offerings are also often included.

What is an Invoice?

Invoices are issued following the delivery of goods and services or once a project is complete. They detail the total costs accrued during the project and provide customers with a method to pay for the products and services they receive. They can be paid in instalments or one-off payments after being sent digitally through invoicing software or in a traditional paper document.

Invoices are time-stamped, and commercial documents are used to itemise and record transactions. Anything purchased on credit will be specified in the invoice, including the deal terms and the available payment methods. They are often used to request payment from customers with an ongoing business relationship.

When Should You Send a Quotation?

Businesses should have their quote ready on the day their customer asks for one. This allows them to take full advantage of the momentum of the client's interest in seeing the project through. Quotes usually fall into three categories:

• Estimates: Projects with variable costs, such as labour and products with market-dependent prices and unforeseen durations, often require a quote with an estimated price. The expectation is that there won't be a significant deviation from the initial estimate. Unlike formal, written quotes, estimates are not legally binding and do not have a fixed price. They are usually included in a broader proposal and rarely stand alone for a project. 
• Fixed Price: This quote gives potential customers a precise estimate for the cost of a project, usually entailing goods or services with a fixed deadline and predetermined budget and labour costs. 
• Request for Quotation (RFQ): RFQs are documents a company submits to several suppliers asking for a quote for their services or products. Any quotes created in response to an RFQ are distinct and unique because they are written specifically and outlined by the sender. A business may offer a template and specific format favouring fixed-price quotes. This is because the primary purpose of an RFQ is to evaluate endorsers before making a purchase. 

The best quotes are precise and professional to demonstrate credibility and enhance client satisfaction. Better customer experiences help shield a company from financial and legal risks. 

Remember that when preparing a formal, written quote, the price for each project component should be itemised. Include a statement that a reqoute is needed if the scope shifts. Ensure everyone signs off before any work starts, and remember that your quote is a legally binding document and must be treated as such.

When Should You Send an Invoice?

Businesses can only invoice after an order has been fulfilled. The longer they wait to send a final invoice, the greater the effect on cash flow. Documents must be sent on time to ensure payment and customer retention.

Invoices for companies providing products should be sent after delivery is completed. Invoices are generated once services have been rendered for those providing services.

Detailed comparison and best practices

Quotations and invoices are essential for vendor invoice management, which rely on one another but have different strengths and uses. 

Quotes benefit companies by allowing them to avoid taking on unpaid work and determining the value of a contract. They ensure everyone is on the same page by detailing everything required for the work. 

This detailing helps cash flow planning and creates a base minimum wage for any work undertaken. It also provides commentary for the business' pricing while reassuring customers that they are a respectable company willing to put their deals in writing. The quote in writing insulates the company if the client fails or refuses to pay.

Invoices are always legally binding documents that establish a customer's obligations to pay for the required goods and services. As a result, they provide a clear record of transactions with specific payment terms. 

Summit's Vendor Invoice Management can centralise and digitise invoices. It automates routing and monitors approvals on a single platform, reducing cost and manual errors. Vendor Invoice Management also features automated alerts for policy violations, unapproved invoices, and duplicate entries, taking the stress out of combing through invoices when something goes wrong.

Talk to us

If you're interested in trying Summit's Vendor Invoice Management, contact us to talk to one of our representatives. They will schedule a free demo and will happily answer any questions you have about our products.