Sometimes people get a quote confused with an invoice, but the truth is, these are two very different things when you’re talking money and business. So, let’s take a look at each one to get to know them a little better, and learn how they are used properly. If you haven’t done so already, you should read our invoice definition before reading this article.
A quote is a formal estimate that shows the products or services needed, and the dollar amount for those products or services. A quote can be verbal or written, it may or may not be the exact same as the end product, in terms of products, services, and the dollar amount owed. A quote lets you know how much you will owe for the projected work or service, and it insures you will only owe that amount, and not some a number that is completely random.
On the vendor side of things, a quote doesn’t change the inventory, as the work hasn’t been completed yet. Once an invoice for the product is sent, then the inventory numbers can change accordingly.
A quote is often valid for 30 days from the time it was issued, and a quote can be readjusted based on the client’s needs. For example, you may get quotes from several different advertising agencies as you are looking to have your website redesigned. Then, you find out you actually need a website redesign, as well as a complete content rehaul, so you ask for new quotes from the agencies based on the new amount of work you need.
On the other hand, an invoice is a detailed list of products that have already been sold or services that have already been completed. Aside from the list, the invoice also includes dates as to when the products were sold or the services were completed, along with the dollar amount owed for each line item, and the total amount that is owed from the customer.
When you’re looking for work to be completed or products to purchase, a quote would come first, then the job would be completed, and an invoice would follow. After the amount on the invoice is paid, a receipt would complete the business transaction.
You may have heard of a proforma invoice, as it is very similar to a quote and an invoice. A proforma invoice looks very similar to an invoice, except it will clearly state that it is a proforma invoice. If you are in an industry that involves shipping and delivery for products, the proforma invoice also needs to include every detail surrounding that process, including the type of packaging, the country the goods are coming from and the country where they will be delivered, and any additional freight details.
This proforma document is usually the kickstart to a business negotiation, as it will list the products or services requested, and the amount that will be owed after the services are completed and/or products are sold. A quote can outline the same things, although generally the format of a quote is more like a letter, and a proforma invoice looks exactly like an invoice.
Once a proforma invoice is sent to the potential client, that person can then make a decision if they want to go through with the transaction based on the information they see, or they can come back with a negotiation to change the scope of work, or ask for a different price, and the conversation continues from there.
And there you have it: the difference between a quote, a proforma invoice, and an invoice. If you’re looking for more information about different types of invoices, check out our invoice types comparison page.