The Difference Between a Quote and an Estimate

May 14th, 2015

One of the things our price book does is simplify the process of quoting prices for jobs and giving estimates on what the total may be.

While it may be difficult for some business to give a standard price for goods and services, it is by no means impossible. The key is making sure you have a system to account for skills, time and materials required for each varying job in order to meet the needs of the customer.

To help facilitate this, quotations and estimates are given.

Now you may be wondering what the difference between the two terms are.

A quotation is a fixed price offer that can’t be changed once the customer accepts it. Quotations can be very useful until more work must be performed than what was originally expected.

In situations where this is often to be the case (such as in construction, plumbing and other areas where problems are often more detailed than they initially appeared) it makes more sense to give an estimate.

An estimate is an educated guess as to what the job may cost – but it isn’t binding as unforeseen circumstances may occur. Many companies will prepare several estimates for review based on several circumstances, including the worst case scenario. This protects you and the homeowner from being surprised by the cost.

Whether you’re giving a quote or an estimate you have to be able to calculate your fixed and variable costs. These include the cost-per-hour of manual labor and the materials needed in order to complete the job to the satisfaction of the customer. You’re quote or estimate is then calculated according to what is the job is predicted to involve.

A price book helps to break down quotes and estimates in a written, standardized breakdown that the customer can view. This will avoid any dishonesty from employees and limit disputes from customers about what the cost of the work will be.

It’s important to update your price book regularly so that you can keep up with rising costs, both fixed and variable.

If you would like more information on our software and how a price book can help you with quotes and estimates, contact us for a consultation.