Invoices and estimates are two accounting documents that are, for a large part, used interchangeably to mean the other. However, nothing could be further from the truth. These two documents are as far apart as the east is from the west. We devote the entire length and breadth of the article to learn these differences.
Difference between an Invoice and an Estimate
These two documents differ in the following five regards:
An invoice requests for the payments of the goods and services that have already been rendered or are pending. It also serves as evidence that a sale has been closed. The estimate, on the other hand, gives the approximate cost of the goods or services that a client orders.
Order of Use
Generally speaking, an estimate is sent out before an invoice. It may be sent out before the goods and services desired are rendered. Alternatively, it may also be sent out after the said goods and services have been rendered, but before any payment is made. The invoice usually comes in after the goods and services are rendered and proceed with an estimate.
The invoice contains a breakdown of the goods and services rendered, the prices of each of those goods or services, and the grand total. An estimate, on the other hand, stipulates the goods and services that you may be willing to offer or ask for and the budget space you desire to work under.
By its sheer nature, an estimate is not final, is negotiable, and subject to some changes. The opposite, however, holds true for an invoice. It is final and is subject to no further negotiations by whichever party to the deal. The parties involved have no choice but to fulfill their obligations.
In case the terms and conditions of an invoice are violated, the matter may be taken to a competent court of law for litigation. That is because it is generally hailed as a legally binding document. Ab estimate, on the other hand, is inadmissible in a court of law.
What to Include in an Estimate
A typical estimate contains the following contents:
- Company Name – The identity of the company that is issuing it.
- Company Phone Number – This is the telephone contact of the company that is issuing the estimate.
- Quotation Number Date – Each estimate has to be uniquely identified and registered. This requires the assignment of a unique quotation number.
- Customer (ID, Name, Address, Phone Number) – It is the unique identification of the customer to whom the quotation is addressed, his unique identification, physical address, and telephone contacts.
- Product Description, Item code, quote purpose – These are the descriptions of the products that are requested, their unique identifiers, and the purpose for which they are sourced.
- Quoted Amount – The sum total amount of money that the products and the services displayed on the estimate is to cost.
- Discount Amount – If there be any discount advanced, the estimate also displays and showcases them on the document.
- Tax / Vat rate – Various jurisdictions do levy some taxes on the products that are sold within their borders. The rates here spell out the amount of taxes that each good or service is supposed to remit.
- Total Quantity – It is the sum total of all the goods and services that have been ordered or requested. The numbers here include a breakdown of each good as well as a grand total.
- Validity details of the quote – Each quote has to run a particular length of time. This metric showcases the total duration of time that the quote is to be deemed valid. It may also contain the terms of references that underlie that validity.
Using free templates to draft the estimate is definitely a good thing to do. Other than simplifying the entire exercise, these templates also work to see to it that every aspect of the transaction is catered for to the letter. You want to find that template that is nearly relevant to your kind of transaction as possible.
Construction Estimate Template
Cost Estimate Template
Estimate Example PDF
Job Estimate Template
Estimate Templates (Excel)
Have we not exhausted just about everything you need to know with regard to the estimates? Well, we now pass the buck to you. It is incumbent upon you to now find a way of implementing the provisions to the latter. What more could you possibly ask of us?