What Is a Quotation?

Name: TranZact
Brand: TranZact

Shopkeeper writing out a price quotation by hand at his counter

A quotation is a formal document a seller sends a buyer stating the price, quantity, and terms for specific goods or services before a sale is confirmed. It is not legally binding by itself, but once accepted, most businesses treat it as the agreed basis for the order and the invoice that follows.

For Indian SME manufacturers juggling enquiries, GST invoicing, and purchase orders, quotations are also where deals get lost to ambiguity: vague pricing, a missing tax line, or an unclear delivery date invites renegotiation days before dispatch.

What Is a Quotation?

A quotation is a formal, written offer from a seller to a buyer that spells out unit prices, quantities, applicable taxes, delivery timeline, and payment terms for a specific set of goods or services, so both sides agree on the deal before it is confirmed.

It differs from a rough verbal price check in one respect: once issued, it becomes the reference document both parties can point back to if there is a dispute over what was promised. That is why quotations are treated as semi-formal commitments, even though they are usually not enforceable contracts by themselves.

Quotations show up constantly in day-to-day sales and purchase work: when a customer enquires about pricing, when an existing order is being renewed, when terms are being renegotiated, or when a formal quote is needed before a purchase order can be raised against it.

Where the Confusion Usually Starts

Quotation vs Proforma Invoice vs Purchase Order

Quotation: a price offer sent before the sale is confirmed, open to negotiation.
Proforma Invoice: a near-final invoice sent to confirm the exact payable amount before delivery.
Purchase Order: the buyer’s formal order, raised once the quotation is accepted.

Document

Purpose

When You’d Use It

Quotation

States price, quantity, and terms for goods or services before a sale is agreed

When a prospect asks for pricing, or terms are still being negotiated

Proforma Invoice

Looks like a final invoice; confirms the exact amount payable before delivery

When a buyer needs to arrange payment or customs paperwork before dispatch

Purchase Order

The buyer’s formal, often binding commitment to buy at the quoted terms

Once the buyer accepts the quotation and is ready to place the order

What a Quotation Must Include to Hold Up

A quotation missing any of these fields is the single biggest reason it turns into a week of back-and-forth instead of a signed order.

Business and client details. Your company name, GSTIN, and the buyer’s name and address, so there is no ambiguity about who agreed to what.
An itemized price breakdown. Unit price, quantity, the applicable GST rate, and any discount, shown per line item, not as one lump sum.
Payment and delivery terms. Advance percentage, credit period, and a dispatch timeline stated in days, not left as (quote) soon.
A validity date. Raw material costs move; a quotation with no expiry invites a customer to hold you to a stale price months later.

Diagram showing the flow from quotation to proforma invoice to purchase order to dispatch and invoice

Quotation vs Estimate: Do Not Confuse the Two

An estimate is a rough number given before all the details are known. A quotation is a firm price under stated conditions. Treating the two as interchangeable is how businesses end up honoring a number they never actually committed to.

Estimates move. They are meant to change once the exact quantity, specifications, or site conditions are confirmed.
Quotations do not, within their validity window. Once sent, a seller is expected to honor the stated price and terms until the quotation expires.
Send an estimate early. Use it for a first, rough conversation while requirements are still being worked out.
Send a quotation once requirements are firm. Item, quantity, GST, and delivery date should all be locked before you formalize a price.
Never let an estimate get treated as a quotation. It is the single most common source of margin-eroding disputes at delivery.

Still chasing a customer for the purchase order after your quotation went cold?

TranZact tracks every quotation from enquiry through dispatch and e-invoicing, so nothing sits waiting on a follow-up you forgot to make.

See Your Quotation-to-Dispatch Pipeline →

Where TranZact Fits for Quotations

TranZact treats Quotation as a named stage in its sales pipeline, sitting between Enquiry and Order Timeline, so an accepted quote flows straight into dispatch and e-invoicing without being retyped.

It will not write your pricing or negotiate terms for you, no software does that. What it removes is the manual handoff: once a quotation is marked accepted, the same line items carry through to the purchase order, dispatch, and invoice.

FAQ

What is a price quotation?

A price quotation is a formal document stating the price, quantity, and terms a seller offers a buyer for specific goods or services, usually before the sale is confirmed.

Is a quotation legally binding?

Not by itself. It becomes binding in practice once the buyer accepts it and a purchase order or payment is issued against its terms, though this varies with contract law and jurisdiction.

What is a sales quotation used for?

A sales quotation is used to formally offer products or services at a stated price, so a customer can make an informed decision before placing an order.

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

A quotation proposes a price before a sale is agreed. A proforma invoice looks like a final invoice and confirms the exact payable amount once the buyer is ready to pay, before goods are delivered.

How long should a quotation stay valid?

Most Indian SME manufacturers set 15 to 30 days: long enough for the buyer to decide, short enough that raw material price swings do not erode the margin you quoted.