Last editedMay 20222 min read
The first step in the quote to cash payment cycle, a price quote sets out a fixed price for a product or service. Those new to business might be wondering – what is a price quote, and what should be included on this document? We’ll cover all the ins and outs of price quotes below, so you can land your next contract and get paid.
What is a price quote?
A price quote is a document designed to benefit both buyer and seller. It’s written up by the business or service provider as a formal explanation of pricing for a purchase or job. Price quotes are usually written on request. When a customer asks for a quote, this means they’re interested in doing business with you. A price quote simply lists the fixed price for the project, which is information the customer needs to decide whether they wish to proceed.
One thing to note is that a quotation is valid for that moment in time. It might be valid for a fixed period of 30 or 60 days, which should be noted on the document. While you can use quotes for a variety of different industries, they’re most used by service-based professionals and those in the construction industry.
What is the difference between a quote and an estimate?
An estimate also shows the customer what a project will cost, so how is it different from a price quote? As the name suggests, an estimate merely offers a general idea of cost. A quote is more specific. When a client accepts the price quote, the supplier’s required to stick to this price and complete all tasks listed. Estimates offer greater flexibility.
Before writing a price quote, be sure you understand the true cost of the work you’re providing. This includes all client requirements and expectations as well as the raw cost of materials, parts, and labor. There should be no surprises with a quote.
When should you use a price quote?
If your business provides professional, project-based services, price quotes help ensure that you and your customers are on the same page. They can also protect you from fluctuating prices, locking in a fixed rate for your services. For example, imagine that a catering company is providing a price quote for an upcoming wedding. They must take the cost of seasonal ingredients into account. By writing a price quote with a 30-day validity date, these fluctuating costs won’t impact their bottom line.
Here are a few additional benefits of providing quotes:
They clearly state your business’s price, terms, and conditions to prevent confusion.
They encourage a sale by giving the customer concrete information.
They provide legal protection for buyers, who know they won’t have to pay additional fees.
How to create a price quote
Realistic costs are at the heart of any price quote. Keep in mind that these documents are legally binding in some countries, so accuracy is key. Communication with the client ensures you understand their requirements as well as the materials and labor required to get the job done.
Once you’ve worked out the pricing aspect, here ’s what to include on your price quotation:
Company name and address
Client details and ID number
Itemized list of project costs
Applicable sales tax
Due dates or timetable for delivery
Terms of validity (typically 30 or 60 days)
Terms and conditions
Accepted payment methods
You’ll find price quote templates available in most accounting and invoicing software. It’s a good idea to have these close at hand so that you can send your price quote as quickly as possible. The customer is most likely collecting several quotes at once before making their decision, so don’t miss out due to faster competition.
We can help
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