What Are Quotes or Quotation In Business?

Index

What is a business quote?
Importance of quotation in business
Quote vs. proposal
How to write a business quotation to the client
Quotation in sales vs quotation in procurement
Conclusion

What is a business quote?

Also known as a quotation, a business quote, or simply a quote, is a document that lists the prices proposed by a seller for their goods or services and offered to a potential customer. On sending the quotation to the client, the supplier is committing to the proposed price and isn’t expected to waver. The quotation document may include additional details such as the taxes, costs for raw material and labor, and other factors contributing to the final pricing. It also includes the duration in which the service will be completed or the goods delivered or the duration for which it is valid.

Importance of Quotation in Business

Often, prices for commodities are already fixed. In such cases, you may wonder why there is a need for business quotes at all. To put it in simple words, when prices are fixed, businesses create an invoice to represent the information.

But when prices for services or goods are variable or dependent on certain conditions, quotes serve a similar purpose as an invoice except that they are generated before the order is confirmed. They are sent to the client before the invoice and, therefore, form the first point of business contact with the client. It is this aspect of business quotes that confers considerable value on them. A well-prepared quote can help convert a potential client into an actual customer.

Quote vs. Proposal

Some of us may have used the terms ‘quotes’ and ‘proposals’ interchangeably. But in a business, it is essential to maintain the distinction between the two words despite their similarities. As discussed earlier, quotes are documents detailing the prices of goods and services for potential customers.

However, a proposal is a detailed document that contains quotes for materials, types of materials required, and an overall bid, often for a large and complex project. Proposals mainly come into use when businesses compete to acquire a large project from a contractor.

For this, a contractor would issue a request for proposals (RFP), and interested businesses would respond with their solutions, costs, and overall bids. Requests for a proposal can often be extremely detailed, and proposals have to adhere to the specifics mentioned in the same. Businesses may also include any examples of past projects in their proposals.

How to Write a Business Quotation to Client

A superior quote will lead to more conversions into invoices. Here’s how business can make that happen.

To begin with, it is always useful to go through sample quotations to get an idea about what is expected.
The next step would be to design or obtain a quote template. This, perhaps, is the most critical part of the process. The quote template must have all the required entries, such as company information, customer contact details, descriptions and gross prices of goods and services, applicable taxes, net prices of goods and services, terms of payment, due dates, and validity.
Fill in the details and review the quote to verify that there are no errors.
It is also important to consider how to send a quotation to client. Since the process is mostly online, quotes are generally sent via email as a PDF attachment.

Tips for Creating a Successful Quote

It is generally considered a good idea to avoid setting prices that are too high or too low. The prices must reflect the quality of the product and, at the same time, be reasonable enough to attract customers.
It is also considered good ethics to be transparent about the details or policies because hidden terms and conditions can result in a lack of trust. Building a trusting relationship with customers is the key to establishing the business as a pioneer.
While there are many quote templates available online that can be utilized to send manual quotes, we recommend using a cloud accounting software, which will make the process easier and output accurate and professional.

Quotation in Sales vs Quotation in Procurement

Quotations in sales and quotations in procurement are similar but for one distinction:

The supplier makes a sales quotation to a client, while
A quotation for procurement is made for the supplier since the purpose is to procure goods.

While procuring, a request for a quotation is made (RFQ) to one or more suppliers who respond to the customer with the quotations.

Conclusion

What appears to be a small part of the business process, a quotation often proves most crucial to attracting and retaining customers. A small error or an ambiguous detail can cause the loss of customers. It is also important to keep in mind the legal terms within which the products or services occur. Therefore, quoting in a quick, accurate, and concise manner, along with a professional layout and effective communication, is imperative for success. Therefore it is a good idea to invest in a good accounting software which can help you streamline your quotations sales orders and payments. There are multiple accounting softwares available in the market but if you are a small business an affordable cloud solution like Deskera might be a good bet.

Deskera Books focuses on enabling customers to create quotes, track and fulfill them, and convert into payments. It provides one smooth interface where you start with a quotation and end in a payment. For more accounting, sales and Business insights, head over to the Deskera blog.