What Is a Quotation?
Quotation
The fixed-price offer that comes before the work, and the document your final invoice should match.
- What Is a Quotation?
- A quotation, or quote, is a supplier's written offer to supply specified goods or services at a stated price, usually for a limited time. Once the customer accepts it, it normally becomes the agreed price for that work. A quotation differs from an estimate, which is a best guess at the likely cost rather than a fixed price.
- A quotation is a written offer to supply defined work or goods at a stated price.
- Accepted, it normally becomes the price for that job; the final invoice should match it.
- An estimate is a best guess; a quotation is a fixed price.
- A good quotation sets out scope, exclusions, price, VAT, validity and payment terms.
"Can you give me a quote?" is where most jobs begin. A quotation answers it with a specific price for specific work, in writing. It protects both sides, and it is often the first real impression a customer has of how you work: the customer knows what they will pay, and the supplier has a clear record of what was agreed, which the final invoice can simply repeat.
What a good quotation contains
| Section | What to include |
|---|---|
| Reference and date | A quote number, such as QUO-0118, and the date |
| Parties | Your name and business details; the customer's name and address |
| Scope | Exactly what is included, with quantities and specifications |
| Exclusions | What is not included, stated plainly |
| Price | Each item and the total; VAT shown if you are registered |
| Validity | How long the price stands, for example 30 days |
| Payment terms | Deposit, stage payments, final terms |
| Changes | How extra work will be priced and agreed |
| Acceptance | How the customer accepts: signature, reply, or purchase order |
Pricing a quoted job: cost to price
- Your costs£2,000
- Price at 25% markup (20% margin)£2,500
- Price including 20% VAT£3,000
Every contract to supply a service is to be treated as including as a term of the contract anything that is said or written to the consumer, by or on behalf of the trader, about the trader or the service, if it is taken into account by the consumer when deciding to enter into the contract.
Quotation, estimate, proforma and invoice
| Document | Purpose | Price |
|---|---|---|
| Quotation | Offers to do defined work | Fixed, if accepted |
| Estimate | Gives a likely cost | Approximate, may change |
| Proforma invoice | Sets out the bill in advance, often to request payment | As stated, before supply |
| Invoice | Requests payment for work done | The agreed price plus agreed extras |
The guide on quote vs estimate explains when to give each.
How a quotation becomes the invoice price
When the customer accepts your quotation, often confirmed by a purchase order for business customers, the quoted price is normally the contract price. Your invoice then shows the quoted price, plus any extras the customer agreed in writing during the job, each as a separate line. If you underpriced, that is usually your loss; if the job changed, the change and its price should have been agreed before you did the extra work. That is why a precise scope matters so much: it is the line between an agreed extra and an unpaid one.
Consumer customers
For households, the Consumer Rights Act 2015 treats what you say or write about the service, which the consumer takes into account when deciding to go ahead, as a term of the contract. A written quotation the customer relied on is exactly that. Where no price was agreed at all, the consumer must pay a reasonable price for the service. So be precise: a quotation to a household should state the scope, the price including any VAT, and what is excluded.
Pricing a quotation
Start with your costs: materials, subcontractors, and your own time at a rate that covers your overheads. Then add the margin you need. Remember that markup and margin differ: a 25% markup on cost is a 20% margin on the price. The markup calculator turns costs into a price, and the profit margin calculator shows what margin a price earns. If you are VAT registered, show the price with and without VAT; the VAT calculator works it out.
Quoting for business customers
Business customers often compare several quotations side by side, so clarity wins work. Use their language: if they sent a specification, follow its structure line by line, so their comparison is easy. Say what you assume, such as access, working hours or who supplies what, because assumptions are where business quotations most often diverge. State your payment terms, and if the customer's standard terms differ, raise it now. If they accept by sending a purchase order, check the order matches your quotation before starting; the order, not your quotation, is often what their accounts team will match your invoice against.
Quoting when you cannot see everything
Some jobs cannot be fully priced in advance: a repair behind a wall, a legacy system you have not seen, a garden you have not dug. Rather than guess high, which loses work, or guess low, which loses money, split the job: quote a fixed price for what you can define, and give an estimate or a day rate for the rest, with a promise to stop and agree before exceeding it. That keeps the certainty of a quotation where it is possible and the honesty of an estimate where it is not.
Deposits in the quotation
For larger jobs or new customers, put the deposit in the quotation, so accepting the quotation means agreeing to pay it. Say when it is due, usually on acceptance, and what it covers. A deposit protects you if the customer cancels after you have ordered materials, and it tests the customer's commitment. If you are VAT registered, invoice the deposit with VAT: an advance payment generally creates a tax point for that amount. Later stages then follow the schedule in the quotation.
Validity periods
A quotation should say how long it stands, commonly 30 days. Costs, availability and the customer's needs all change, and an open-ended quotation could be accepted months later at prices that no longer work. If a customer accepts after the validity period, you can honour the quotation or re-price, but say which before starting.
Numbering quotations
Give quotations their own series, such as QUO-0001, separate from invoices. A declined quotation then leaves no gap in your invoice sequence, and an accepted one can be referred to by number on the invoice that follows: "As per quotation QUO-0118". The invoice number generator can set up both series.
Quotations and VAT
A quotation is not a VAT document. It creates no tax point and no VAT is due because of it. If you are VAT registered, show VAT on the quotation so the customer knows the full price; if you are not, show none and say your prices are not subject to VAT. The VAT is charged on the invoice when the supply is made.
A worked example
A decorator is asked to paint a three-bedroom house. She measures up and sends QUO-0118: prepare and paint walls and ceilings in all rooms listed, two coats, customer to supply chosen paint colours from the list attached, excluding woodwork and exterior, £2,850, valid 30 days, 25% deposit on acceptance, balance on completion within 7 days. The customer accepts by email. Midway, the customer asks for the woodwork to be done too; the decorator quotes £640 by text, the customer agrees, and she does it. Her final invoice shows the quoted £2,850, the agreed £640 extra dated and referenced, less the deposit already paid. There is nothing to dispute.
Common mistakes
- Vague scope. "Paint the house" invites argument; list what is included.
- No exclusions. Say what is not in the price.
- No validity period. Prices change.
- Forgetting VAT if you are registered, or showing it if you are not.
- Doing extras without a price. Agree changes in writing before doing them.
- Underpricing. Work from costs and margin, not from what you hope the customer will accept.
- No acceptance record. Keep the signed quotation, the reply email or the purchase order that accepted it; it is your evidence of the agreed price if the invoice is ever questioned.
Following up a quotation
A quotation that goes quiet is not necessarily lost. A short follow-up a week after sending, asking whether the customer has any questions, often turns a maybe into a yes, and a customer who declines will often tell you why. Record the outcome either way, in a sentence: accepted, declined on price, declined on timing, or no reply. Over a year, those notes show which kinds of work you win, what price levels lose jobs, and where your quotations could be clearer.
Quotations for regular work
For work you repeat for the same customer, such as monthly maintenance, cleaning or bookkeeping, a single quotation can set a rate or a fixed monthly price, a start date and a notice period, with invoices then following monthly. Review the price once a year, and give notice of any change in writing before it takes effect, so the invoice after the change never comes as a surprise.
Keeping quotations
Keep accepted quotations with the invoices that followed; together they show what was agreed and what was billed, which settles most disputes. Keep declined ones too, with a note of why they were declined: they are the best guide you have to pricing the next job well.
Related terms
A quotation is often followed by a purchase order and, for payment in advance, a proforma invoice. The guide on quote vs estimate covers the choice between fixed and approximate prices, and invoice payment terms covers the terms to include.
The short version
A quotation is a promise about price, so make it one you can keep: define the scope, list the exclusions, show VAT if you charge it, set a validity period and payment terms, and agree any change in writing before doing it. Then the invoice at the end is simply the quotation, delivered, with no surprises for either side.
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More from the glossary
Frequently asked questions
Is a quotation binding?
A quotation is an offer. Once the customer accepts it, it normally forms the contract price. For consumers, what a trader says or writes about the service that the consumer relies on is treated as a term of the contract under the Consumer Rights Act 2015.
How long is a quotation valid?
As long as it says. Most quotations state a validity period, often 30 days, after which the supplier can re-price.
What is the difference between a quotation and an invoice?
A quotation offers a price before the work. An invoice asks for payment after it, or at an agreed stage.
Sources
Official guidance on GOV.UK.