Quotation Format — With Validity, Estimate and Proforma

What a quotation has that an invoice does not

A quotation is an offer. An invoice is a record of something that has already been sold. Structurally they are the same document, which is why most billing software — this one included — builds both from the same editor and the same template.

Two things change. First, the second date: on an invoice it is the date payment is due, and on a quotation it is the date the quoted price stops being offered. Second, the document identifies itself as a quotation in its title and its numbering, so it can never be mistaken for a request for payment.

The validity date

The validity date is the part of a quotation that does the most work and gets omitted the most often. Prices on materials move; a quotation with no expiry is an open offer to supply at a price that may no longer be real.

Thirty days is a common default, but the right period is whatever matches how fast the prices behind the quotation move. A quotation for labour can stand for months; one for commodities should be measured in days.

A filled quotation

The example below quotes for supply and application of wall putty and primer — two material lines and a labour line, priced and taxed exactly as the resulting invoice would be, with a validity date instead of a due date.

Estimate, quotation and proforma

Three words that get used loosely, and the difference is worth keeping straight because each sets a different expectation about whether the numbers are final.

• An estimate is an approximate figure given before the work can be scoped precisely. It signals that the final amount may differ, and it is the right word when it may.
• A quotation is a fixed offer at a stated price, valid until a stated date. It is the right word when the price will not move within that period.
• A proforma invoice is a document that looks like an invoice but is raised before supply — often to get payment or an advance released, or to support an import. It is not a demand for payment and should not be recorded as a sale.

The terms section, and what belongs in it

A quotation's terms section carries the conditions attached to the price — how long it stands, what is included, what is not, and what happens if the scope moves. It is the section that prevents the argument later, because it is the only part of the document that says what the price assumes.

• How long the price is held, restated in words rather than only as a date
• What the price includes — material, labour, delivery, installation
• What it excludes, which is usually the longer list and the more useful one
• How a change in scope is priced, so a variation has a mechanism rather than a negotiation
• Payment terms if an advance is expected before work begins

Following up on a quotation

The validity date does the follow-up work for you. Once it passes, the quotation has lapsed on its own terms and a fresh one can be issued at current prices without either side having to reopen a negotiation.

That is the practical reason to put a date on it even when prices are stable. A quotation with no expiry is an open offer at a price that may no longer be real, and the only way out of it is a conversation neither side wants to have.

Turning a quotation into an invoice

When the offer is accepted the quotation becomes an invoice. The line items, rates and tax carry across unchanged; the numbering moves to the invoice series and the validity date becomes a due date.

Keeping the two in separate number series is worth doing from the start. A quotation and an invoice that share a number make it impossible to tell later which document was actually raised on the sale.

Common questions

Does a quotation need a GSTIN?

The seller's GSTIN is normally shown on a quotation so the buyer can see who they are dealing with. Whether a particular quotation needs the buyer's GSTIN is a question for a CA.

Is a quotation legally binding?

A quotation is an offer, and whether accepting one forms a contract depends on its terms and on the correspondence around it. That is a legal question rather than a formatting one.

What is the difference between a proforma invoice and a quotation?

A quotation is an offer made before agreement. A proforma invoice is raised after agreement, before supply, and is used to request payment or to support shipping and import paperwork.

Should quotations be numbered separately from invoices?

Yes. Separate series keep the two document kinds distinguishable, and they stop a quotation from occupying a number in the invoice sequence.