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The importance of quotes in invoicing

What purpose do quotes serve? Does it have any legal viability or payment obligations? Can you do without quotes in your invoicing process?

So what is a quote, anyway and what purpose does it serve?

A quotation in business is document similar to an invoice in that it contains much the same information. However, it has a different purpose: to provide the customer with a detailed list of the product or service being offered, before the order is confirmed.

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Because quotes are sent before an invoice, they are the first point of business contact with your customer. In other words, the better your quote, the better your chance of success and the opportunity to convert that quote to an invoice.

How to create a quote

The best way to understand a quote is to view one. So we’ve included a quote created with Debitoor invoicing software.

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Remind you of something? Yep, it looks just like an invoice. With a crucial difference - that it’s labeled as a quote.

However, the contents are the same. In Debitoor, the template for filling in a quote looks almost exactly like our invoice templates and includes fields for:

  • Customer contact details
  • Your company information
  • Description of your products/service
  • Applicable VAT
  • Terms of payment and due date
  • Net price and gross price
  • Totals

Officially, that’s all. Because a quote has a commercial purpose, there are usually a few other criteria to keep in mind when creating a quote.

The first, is that it’s recommended to be transparent about your product or service because this document is presenting them to your customer. Avoid hidden terms or conditions that might put them off.

Second, especially for freelancers and small business owners, be concrete about your prices. If you’ve already set your prices, great. You’ve done your research, so stick to them in your quotes and invoices.

If you haven’t yet set your prices, there’s two things to keep in mind:

  • Avoid setting a price that is too low. Although it might seem like a good idea to go lower than your competitors and get more business, this tactic often backfires as customers might perceive your product or service as lower quality. It might also mean that you’re not able to cover your costs effectively.
  • Avoid setting the price too high. This one seems obvious. If it’s above average for your market, and doesn’t provide a clear advantage over the competitor’s offers, don’t do it.

Fortunately, there’s a simple way to skirt these two possibilities when it comes to setting your prices. Keep the following in mind: the prices of your competitors and what you need in order to cover your cost of materials, labour, time, etc.

There are a few other things to keep in mind with a quote:

  • Deadlines for the delivery of the product or service.
  • The legal terms within which your products/service occur.
  • Clarity: remember that it’s a quote, not a novel. Short and succinct wins.

What happens after the quote

Once you send your quote, if your customer accepts, you can convert your quote to an invoice with a click in Debitoor without having to start from scratch. Saving you time, and getting you closer to getting paid.