Understand the key differences between quotes and invoices to streamline your billing and sales process.
When managing a business, clear communication with your customers is vital—especially when it comes to money matters. Two essential documents that often get confused are the quote and the invoice. Although both list items and prices, they serve different purposes at different stages of the sales process.
A quote, also known as a quotation or estimate, is a formal statement that outlines the expected cost of goods or services before the sale happens. It helps potential buyers understand how much they will need to pay based on their specific needs.
Think of a quote as a promise of price—it sets clear expectations between a seller and a buyer. It’s not a demand for payment but rather an offer showing estimated pricing and terms.
Informs the buyer about the estimated cost.
Sent before any work begins.
Usually non-binding until accepted in writing.
Details goods, prices, taxes, validity, and conditions.
Suppose a client asks a web designer to create a business website. The designer reviews the requirements and sends a quote listing the project scope, estimated timeline, cost, taxes, and validity (e.g., valid for 15 days). Once the client approves it, work begins.
Quotes protect both sides: for buyers, they provide transparency; for sellers, they reduce misunderstandings about pricing and deliverables.
An invoice is a payment request sent after goods or services have been delivered. It’s a legally recognized document that details the final amount due and serves as a record of the transaction.
While a quote gives an estimate, an invoice provides the actual amount owed, along with payment terms such as due date and method.
To formally request payment for delivered goods or completed services.
Issued after goods or services have been delivered.
A legally binding record confirming payment obligations.
Invoice number, buyer/seller info, taxes, due date, and total payable.
After completing the website design project, the designer sends an invoice summarizing the services provided, total cost, tax, payment method, and due date. Once paid, both parties keep the invoice for financial records.
| Feature | Quote | Invoice |
|---|---|---|
| Purpose | A quote is created to inform the buyer about the estimated cost of goods or services before the work begins. It helps the buyer understand what expenses to expect and make a purchasing decision. | An invoice is issued to request payment from the buyer after the goods or services have been provided. It serves as an official demand for payment and a financial record for both parties. |
| Timing | Sent before any goods or services are delivered — typically during the negotiation stage when a customer inquires about pricing. | Issued after the delivery of goods or completion of services — once the seller is ready to receive payment. |
| Legal Status | A quote is not legally binding unless it is formally accepted by the buyer. Once accepted, it may become a contract or lead to one. | An invoice is a legally binding document that confirms a sale has occurred and specifies the buyer’s obligation to pay. |
| Contents | Includes details such as item descriptions, estimated prices, validity period, terms & conditions, and possible discounts. | Lists the actual amount due, invoice number, payment terms, tax details, total cost, and other financial elements required for accounting. |
| Stage in Sales | Represents the beginning of the transaction — used to attract and inform the potential buyer before the sale is confirmed. | Represents the end of the transaction — used after the sale is confirmed and the product or service is delivered. |
| Used By | Typically prepared by sales or service teams to communicate pricing to clients and generate potential orders. | Usually created by finance or billing departments to manage accounts receivable and record completed transactions. |
| Customer Action | The buyer reviews and approves the quote before any work starts. | The buyer makes the payment based on the invoice details. |
| Document Format | May include optional branding and estimated figures — not standardized. | Follows a standard accounting format with invoice numbers, tax information, and official details.s |
| Purpose in Record Keeping | Mainly used for reference and negotiation, not for bookkeeping. | Serves as a key accounting document used in audits, tax filings, and financial records. |
Customer requests a quote from the seller.
Seller prepares and sends a detailed quote with pricing and terms.
Buyer approves the quote and confirms the order.
Seller delivers the agreed goods or services.
Seller issues an invoice requesting payment.
Buyer makes the payment, and the transaction is recorded for both parties.
This workflow ensures clarity, professionalism, and proper documentation at every step of the business process.