An often overlooked part of the sales process for all businesses is the generation of quotations and invoices. While not as exciting as closing a big deal, both these administrative processes are key to running an efficient and profitable business.
Formal and accurate quotations and invoices are important part of your customer service process, and are an opportunity to showcase your business’s professionalism. By setting a good first and last impression on your customers, you increase your chances of both gaining new business and life-long customers.
Although quotes and invoices are part of the same process, they serve different purposes. It’s therefore important that business owners know the difference.
Below is a guide on the key differences between a quotation and an invoice and the best practices for generating each one.
What is a quotation?
A business quote is a document sent to a potential customer before they have made a purchase or any services have been rendered. It outlines how much the customer can expect to pay for a particular service or products before they commit. For example, a quotation for a service job might have some of the following details – pricing for materials, labour costs and taxes.
It’s important that a potential customer accepts the quotation before any work can begin or products are delivered, after which it becomes a legally binding contract.
What is an invoice?
An invoice is given to a customer after services have been rendered or goods have been delivered. It often works as a request for payment from the seller to a buyer and is a legally binding agreement.
The invoice lists the final costs and when payment is due. Details that must be included are the names of the seller and client, description and price of goods or services, as well as the terms of payment.
Beyond its main purpose of helping a business collect payment, it necessary that business owners record and maintain all sale invoices so the company can report its income and pay the proper amount of tax.
Quotations and invoicing best practices
Quotations best practices
1. Provide a quote within the stated timeframe.
2. Describe the job components clearly and accurately.
3. Itemise all materials or resources required.
4. Detail all your costing and taxes.
5. Clearly define the terms and conditions of your quote.
6. Opt for an electronic quote for increased convenience and accuracy.
Invoicing best practices
1. Itemise the invoice
2. Clearly define the payment terms
3. Invoice as soon as you provide the service or hand over the product
4. Additional product or service options to inform the customer of relevant offerings your company can provide
Both these documents are critical to the financial success of businesses. Fortunately technology is increasingly being implemented into small businesses to help manage the time-consuming processes of generating both quotations and invoices.