Quick Comparison at a Glance
| Quotation | Invoice | |
|---|---|---|
| When sent | Before work begins | After work is completed |
| Purpose | Estimate the cost | Request payment |
| Legally binding? | Usually not | Yes (when accepted) |
| Requires payment? | No | Yes |
| Includes due date? | No | Yes |
| Includes invoice number? | No | Yes (required) |
| Called also | Quote, Estimate, Proposal | Bill, Tax Invoice |
What is a Quotation?
A quotation (also called a quote, estimate, or proposal) is a document you send to a prospective client before any work begins. It sets out exactly what services or products you plan to provide and what the expected cost will be.
When a client asks "How much will this cost?" — your answer is a quotation. The client can either accept, reject, or negotiate the quote. Once they accept it, both parties have agreed to the scope and price.
Quotations are particularly important for service businesses and contractors where the scope of work needs to be agreed upon before starting. They protect you from scope creep (clients adding work without additional payment) and protect the client from surprise costs.
A well-written quotation should include: your business details, client details, a description of the proposed work, a price breakdown per item or service, the total cost, an expiry date (e.g., "Valid for 30 days"), and your terms and conditions.
Example: A web designer sends a quotation for $2,500 to build a 5-page website, with itemized costs for design, development, and revisions. The client reviews and approves it. Work begins.
What is an Invoice?
An invoice is a document you send to a client after work has been completed (or at an agreed billing milestone) requesting payment. It is a formal demand for money owed, and once issued, it creates a legal obligation for the client to pay within the stated terms.
Unlike a quotation, an invoice has a specific due date. It provides a permanent financial record for both parties and is required for proper bookkeeping and tax compliance. In many countries, VAT or GST invoices are a legal requirement for registered businesses.
An invoice should match the originally agreed price from the quotation (unless additional work was authorized). Any discrepancies between the quote and invoice should be discussed with the client before sending.
Example: The same web designer completes the website and sends invoice INV-042 for $2,500, due in 14 days, with bank account details and a payment link. This matches the approved quotation.
What About a Proforma Invoice?
A proforma invoice sits between a quotation and a final invoice. It is a preliminary bill that looks like a real invoice but is explicitly marked as "Proforma" — meaning it is not a demand for payment yet.
Proforma invoices are commonly used in international trade to declare the value of goods for customs purposes, or in advance of delivering a service to give the client an official document to get internal budget approval before committing.
Quotation
Before work. No payment required. Estimate only.
Proforma Invoice
Before payment. For customs or budget approval purposes.
Tax Invoice
After work. Payment required. Legally binding.
The Typical Billing Lifecycle
When to Use Each Document
QUse a Quotation when...
- A client asks for a price estimate
- The project scope needs to be agreed upon
- You want to outline deliverables before starting
- Submitting a formal bid or tender
- The price may change based on client feedback
IUse an Invoice when...
- Work has been completed or delivered
- You've reached a billing milestone
- Requesting a deposit or upfront payment
- Billing for recurring services (monthly)
- You need a formal payment record for taxes
Common Mistakes When Using Quotes and Invoices
Sending an invoice without first getting an approved quotation — leads to payment disputes
Not including an expiry date on your quotation — clients may accept months later at the old price
Treating a quotation as legally binding — only a signed contract or accepted invoice creates a firm obligation
Changing the amount on the final invoice without informing the client first
Not converting the quotation number to an invoice number — always use sequential invoice numbering
Converting a Quotation into an Invoice
Once work is complete and the client has approved the quote, converting it to an invoice is straightforward. The core content (line items, prices, descriptions) stays the same — you just change the document type and add the necessary invoice fields:
Create your invoice or quotation now
Smart Invoice Tool supports both invoices and quotations — free, fast, and no sign-up required.
Create for Free