No matter the industry, people are often confused when it comes to understanding the difference between a quote vs estimate.
That’s why, in this article, we explain what each term means, how they both stand up to legal scrutiny and what you should be asking for.
Key takeaways
- Like contracts, quotes are legally binding. If a customer accepts a quote, you must provide the services detailed at the cost listed.
- An estimate is more of an informed guess re. what something will cost and how long it will take to fulfill.
- You should include dates in quote documents as the listed price may only be available for a set period.
- If you find you’re getting asked for a lot of estimates and/or quotes, you can use PandaDoc’s templates and specialist software to speed up the process.
Is a quote the same as an estimate
The simple answer is ‘No’.
One of the main differences is accuracy.
Quotes are a more accurate guide to the potential cost of something than an estimate.
You can think of the latter as being a precursor to the former in most cases.
Estimates tend to provide a cursory idea of what something might cost based on both time and financial factors.
They can be useful for giving customers an indication of whether a particular service provider will be able to meet their budgetary expectations.
If the ballpark figure a customer receives as an estimate appeals to them, the next step might be to request a formal quote.
What is a quote
What is a quote, then?
A quote is a formal offer from a seller to a potential buyer detailing specific goods or services with their prices, terms, and conditions, serving as a basis for a potential purchase agreement.
Once the work is completed, the details contained in the quote can be transferred to an invoice and sent (or handed) to the customer.
Here are some business quote examples.
Is a quote legally binding?
If you provide a potential customer with a quote, it has the same legal standing as a contract, i.e., legally binding.
If they accept the quote (which they don’t have any legal obligation to do), you must uphold any details/costs outlined in it.
Even if things change between using your chosen quote templates to provide a price and the customer accepting it, you must honor what you agreed to.
This is why time-limited quotes are popular.
What should be included in a quote?
A good quote should include all the relevant details of the planned project.
Effort should be spent analyzing what’s needed and what each element will cost in terms of time and money.
For example, if someone wants an extension built, the provided quote might cite a total price of $35,000.
It should also list the various parts of the project the builder will handle and the cost.
This might include factors such as materials, labor, timeframe, and payment terms.
When should a business use a quote?
Quotes can take considerably more time and effort than estimates, so you don’t want to create one for every inquiry.
First, you must ensure the customer is serious and not just shopping around.
If they’re still at the stage of looking rather than contracting, supplying an estimate is probably the better option from a business perspective.
Progressing straight to a quote is a good idea for regular work, submitting bids, protection.
What is an estimate
An estimate is an assessment of the expected cost for goods or services provided by a seller to a potential buyer before a formal agreement is reached.
It offers an approximate figure or a range of costs based on initial information, taking into account factors such as materials, labor, and other relevant expenses.
You can use an estimate template to make things easier when creating an estimate.
Is an estimate legally binding?
No. Unlike a quote, an estimate isn’t legally binding.
They’re extremely negotiable and flexible, and the client may ask for cheaper materials or a different time frame based on them.
What should an estimate contain?
An estimate should include a description of goods or services, itemized costs, total estimated cost, payment terms, validity period, and any disclaimers.
It may also note assumptions and potential variations in the final cost.
When should a company use an estimate?
You should use estimates to respond to initial inquiries from potential customers.
At such an early stage, you may not know precisely what the project will entail or what the costs for each component will be.
That said, your estimate shouldn’t be a wild guess and will likely be based on similar work you’ve undertaken.
An estimate can also be used when you don’t have exact details.
What is the difference between a quote and an estimate
A quote provides a fixed price for goods or services, while an estimate offers a range or approximation of the expected cost, often subject to change based on factors like final specifications or unforeseen circumstances.
| Quote | Estimate | |
|---|---|---|
| Is it legally binding? | Yes | No |
| Does it include costs? | Yes | No |
| Is it negotiable? | No | Yes |
| Is it detailed? | Yes | Not always |
Why do estimates and quotes matter
Estimates are important for both potential customers and vendors.
For the former, they can offer a rough idea of the likely cost of a project or service so they can make an informed decision about which providers to request quotes from.
For vendors, an estimate might lead to a request for a quote and win them future business.
Estimates are also helpful as they require less time to generate than quotes.
If providers had to supply a quote every time a potential customer approached them, this would represent a lot of time and effort invested with no guaranteed return.
Quotes are essential as they can formalize what started as an inquiry.
They can take the approximations found in an estimate and turn them into exact figures so customers can make an informed decision.
If accepted, the vendor must provide the products or services at the cost detailed in the quote.
Close more deals with PandaDoc’s top quoting software
So, now you know the difference between an estimate and a quote.
If you run a busy company, you may find that requests for estimates and/or quotes can become overwhelming.
One solution is to use tools such as PandaDoc’s quoting software.
This can help streamline things while eliminating the possibility of human error that arises from all manual processes.
With PandaDoc, you can do everything from generating professional-looking custom quotes to including standardized charges, such as per-hour labor costs.
Once you’ve tried it and seen how much time and effort it saves, you’ll ask yourself why you didn’t switch sooner.
Frequently asked questions
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As quotes are legally binding, they should always be submitted in writing to avoid future disputes between the parties involved.
As estimates aren’t legally binding and are subject to (sometimes quite significant) changes, it’s perfectly acceptable to give them verbally.
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A handwritten estimate is perfectly acceptable, but when providing a quote, this won’t look as professional to the client and should be avoided.
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The thing to remember is that any costs, durations, or other detailed information provided in a quote have to be exact as this is legally binding.
Common things to include in quotes and estimates are contact details and information about you, the customer, and the product or service being discussed.
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No. Terms and conditions only need to be included in quotes, as the customer must understand any factors that might affect the details outlined in the document, such as exclusions and special clauses.
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The latter are nearly always time-limited, so noting down the date is essential. That said, including dates in both quotes and estimates can be helpful when it comes to your record keeping.
Disclaimer
PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.
