Difference Between Quotation and Invoice

The main difference between a Quotation and an Invoice is that a Quotation is an estimated cost provided before agreeing to undertake a service or deliver goods, while an Invoice is a request for payment issued after the service is provided or the goods are delivered.

What is a Quotation and What is an Invoice?

A Quotation is a document provided by a seller to a potential buyer. It outlines the proposed cost of goods or services. The quotation includes detailed pricing, terms, conditions, and sometimes the validity period during which the prices are applicable. Businesses use quotations to give potential customers a clear idea of what to expect in terms of pricing and to facilitate further negotiations or decision-making.

An Invoice, on the other hand, is a document issued by a seller to a buyer once goods or services are delivered. It lists the items or services provided, the due amount, payment terms, and the payment due date. Invoices are used to formalize transactions and ensure that payment is received within a specified timeframe. Essentially, the invoice is a legal request for payment and serves as an official record of the sale.

Key Differences Between a Quotation and an Invoice

1. Document Purpose: A Quotation estimates costs before a transaction, while an Invoice requests payment after the transaction is completed.
2. Timing: Quotations are provided prior to any agreement, whereas invoices are issued after the goods or services are delivered.
3. Legal Binding: Quotations are generally not legally binding, but invoices can be used in legal proceedings if payment is not made.
4. Details Included: Quotations often highlight potential costs and conditions; invoices include exact costs, payment terms, and deadlines.
5. Validity Period: Quotations frequently have a validity period for price acceptance, while invoices specify payment terms and due dates.
6. Negotiation: Quotations may open the door for negotiations before finalizing a deal; invoices reflect agreed-upon terms and are not negotiable.
7. Format: A quotation may not necessarily follow a standardized format, whereas an invoice follows a more structured format as per accounting practices.
8. Reference: Invoices often have additional legal references and compliance information which are usually absent in quotations.
9. Purpose of Issue: Quotations aim to propose a deal, invoices aim to collect payment for a deal already completed.

Key Similarities Between a Quotation and an Invoice

1. Itemization: Both documents itemize services or goods with corresponding prices or cost estimates.
2. Client Details: Each includes details about the buyer and the seller, such as names and contact information.
3. Descriptions: Both provide descriptions of the goods or services being offered.
4. Dates: Both documents feature dates that are key to the transaction—validity for quotations and the issue date for invoices.
5. Business Header: Each typically features the business’s logo and contact information at the top.
6. Terms and Conditions: Both may include specific terms and conditions related to the transaction.
7. Reference Number: Quotations and invoices often carry unique reference numbers to track and manage documents easily.

Features of Quotation vs Features of Invoice

1. Document Purpose: The Quotation serves to provide an estimated cost for goods or services, aiding in decision-making. The Invoice, conversely, demands payment for goods or services actually delivered.
2. Validity Period: Quotations feature a validity period during which the quoted prices are held. Invoices do not offer a validity period but specify a payment due date.
3. Price Estimates vs. Exact Costs: Quotations provide estimated costs which can be subject to change based on terms agreed upon later. Invoices list exact prices for goods or services already agreed upon and delivered.
4. Time of Issue: Quotations are issued before any agreement is made to offer potential buyers a clear price guide. Invoices are issued post-delivery of goods or services as a formal payment request.
5. Legal Binding Nature: While a quotation is generally not considered legally binding and serves more as an estimate, an invoice acts as a formal, legal request for payment and can be pursued legally if needed.
6. Details Included: Quotations often include a description of goods/services, estimated costs, terms, and conditions. Invoices list the exact items delivered, their prices, the total amount due, and payment instructions.
7. Negotiation Scope: Quotations allow room for negotiation before a deal is finalized. Invoices reflect agreed-upon terms from the quotation and are not open for negotiation.
8. Document Format: Quotations may follow varied formats depending on the seller’s preference. Invoices adhere more strictly to standard accounting principles and often include tax information.
9. Terms and Conditions: While both may feature terms and conditions, invoices typically have more detailed payment terms, penalties for late payment, and instructions for making the payment.