PDF DocOfficeQuotation, Estimate or Proforma Invoice: What Is the Difference?
The short answer
A quotation is a fixed price offer. An estimate is an informed guess that may change. A proforma invoice is a preview of the invoice that will follow, often used for customs or advance payment. People mix the words in everyday speech, but the difference matters when money and contracts are involved.
What a quotation should contain
A useful quotation names the seller and the client, carries a unique number and a date, and lists each item with quantity, price and total. It states the tax treatment clearly, says how long the price is valid, and sets out payment terms and delivery time. Once the client accepts it, many businesses treat it as binding, so wording should be precise.
How an estimate differs
An estimate is used when the final cost depends on things you cannot know yet, such as the hours a repair will take. It usually gives a range or a best guess and says that the final price may change. If the real cost will exceed the estimate by a large margin, it is good practice to tell the client before continuing.
What a proforma invoice is for
A proforma invoice looks like an invoice but is not a request for payment in the accounting sense. Exporters use it so a buyer can arrange an import licence or a bank transfer, and shops use it to take an advance. The real tax invoice is issued later, and the proforma should be marked clearly so it is not booked twice.
Tax on quotes
Whether a price includes tax is the most common cause of disputes. In some places consumers expect to see tax-inclusive prices, while business customers prefer to see tax listed separately so they can reclaim it. State which one you use, show the tax name and rate, and add your tax registration number where the law requires it. Rates and rules differ between countries and change over time, so check with a local adviser.
Good habits
Number quotes in sequence, keep a copy of each one, and set an expiry date. Save the exact file you sent, because it is the evidence of what was offered. If a client asks for changes, issue a revised version with a new number or a revision letter rather than editing the old one silently.
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