What Is Quotation?

TL;DR: A quotation is a formal document shared by a seller that clearly states pricing, terms, and conditions for a product or service, helping both parties align before a sale.

Knowing what a quotation is and why it is used in business operations is essential. Quotations play a critical role in sales and procurement by clearly defining prices, specifications, and terms, reducing ambiguity before transactions begin.

What Is a Quotation?

A quotation is a formal written statement provided by a seller to a potential buyer that outlines pricing, quantities, specifications, and terms for goods or services. It acts as an official offer that the buyer can evaluate and accept.

Quotations are widely used across manufacturing, services, construction, and trade, where clarity on cost and delivery terms directly impacts decision-making.

Importance of Quotations in Business

Clarity and Transparency

Quotations clearly define what is being offered and at what price, ensuring both parties share the same expectations.

Legal Protection

Once accepted, a quotation can become legally binding, protecting both buyer and seller.

Budgeting and Financial Planning

Detailed quotations help businesses plan expenses accurately and avoid unexpected costs.

Record Keeping

Quotations serve as formal documentation for audits, references, and future negotiations.

When Should You Send a Quotation?

Businesses typically issue quotations when:

• A customer formally requests pricing or a proposal.

• A prospect asks for cost details of a product or service.

• Prices are being negotiated.

• Existing customers request renewals or repeat orders.

• A quotation is required as part of a contract.

How to Write a Quotation

To create a professional quotation:

• Start with your company details and date.

• Clearly list products or services with quantities and prices.

• Mention payment terms, delivery timelines, and conditions.

• Include applicable taxes, fees, or discounts.

• Add a signature or authorization section.

What to Include in a Quotation Template

A standard quotation template should contain:

• Business and client details

• Quotation number and date

• Itemized list of products or services

• Pricing and currency information

• Terms and conditions

• Signature and notes section

How to Format a Sales Quotation

A well-formatted sales quotation should:

• Use a professional letterhead

• Clearly identify the customer

• Present items and pricing in tables

• Highlight terms and validity

• Include contact details and signature lines

Quotation vs Proforma Invoice

A quotation outlines proposed prices and terms before a sale. A proforma invoice resembles a final invoice and is used to confirm payment details before goods or services are delivered.

Quotation vs Estimate

A quotation provides a firm price under defined conditions, while an estimate offers an approximate cost that may change based on actual requirements.

FAQs

What is a price quotation?

A price quotation is a formal document that states estimated costs and terms offered by a seller to a potential buyer.

What is a sales quotation?

A sales quotation is an official offer that details pricing and conditions under which a seller agrees to sell goods or services.