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.
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.
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.
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.
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:
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.
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.
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.
|
|
Quotation |
Invoice |
|
When is it issued |
Before delivery of goods and/or services |
Delivery of goods and/or services has been fulfilled |
|
Purpose |
The client would like to inquire about cost estimates or pricing to the vendor/s for goods and/or services that they require. |
The vendor is requesting for payment for the successful delivery of goods and/or services to the client. |
|
What’s included in this document? |
Itemised list of services or goods required, Projected cost of goods or services, Project or delivery timeline |
Itemised list of services or goods fulfilled, Actual or accrued cost of goods or services, Payment terms and acceptable payment methods |
|
Legally binding? |
No |
Yes |
|
Does the client pay at this stage? |
No |
Yes |
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.
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.