An estimate is a guess of the approximate cost of a job to be done. A quote, on the other hand, is the exact cost of a job or service to be delivered.
Quotes are more accurate than estimates. Estimates, since they are based on limited information, give a rough idea of the cost before one finalizes the plans and sends out a quote.
It is critical to understand the difference between quotes and estimates. It is of value that you use the right one at the right time and make sure it has all the necessary information at hand.
How to Tell an Estimate from a Quotation
Some businesses can’t give standard prices for goods and services. This may be because the skills, time, and materials required for each job vary depending on different customers’ needs.
A quotation is a fixed price offer that can’t be changed once accepted by the customer. If there is a likelihood that much more work has to be carried out than expected, then an estimate should be given.
A specification should be made clear of what the quotation covers and that variations outside of the specifications will be subject to additional charges.
An estimate, though not binding, is a guess at what a job may cost. Providing several estimates based on various circumstances helps to take account of possible unforeseen developments, including the worst-case scenario.
How Do You Get An Estimate For A Job?
An estimate is roughly how much the contractor thinks the job will cost, based on skill and experience. It is therefore not a set price.
Estimates are either verbal or are done in writing — there is, however, no legal difference between a written or verbal estimate. The actual price may be more or less, though it is expected that it should be within 10 to 15 percent of the final cost.
In the case of larger jobs, it is a good starting point for planning, since it helps in working out the overall budget of the job.
Is There a Need For An Estimate And Quotation?
An estimate is a rough guess, based on what a job may cost. Often it is supplied either before all the details of a particular piece of work are known or during a site visit.
Estimates are therefore necessary for getting building consent and applying for a loan.
Once an estimate is decided and by use of the same contractor, one should get a proper quote in writing.
The use of a quantity surveyor is also applicable in making an estimate before one puts the job out to tender. This gives a benchmark to judge a quote against.
This can be achieved by giving the builders who are tendering, the quantity surveyor’s estimates of materials and labor, so they have more information to use in putting together their estimate or quote.
An estimate is the first thought when it comes to deciding costs and numbers can change drastically when you get further information or when unexpected complications crop up as the scope of what has been asked to be done increases.
A quote, on the other hand, is equally significant. This is because, by accepting a quote, a contractor cannot charge more than the agreed price unless one agrees to extra work or the scope of the job changes while it is underway.
Estimates and quotations ensure that one’s focus is on the benefits that one can provide to customers. Getting this right attracts many customers who will be willing to pay the price required.
How to Carry Out an Estimate and a Quotation
There are several ways in which you can achieve this. Every business has to give its customers prices for its products or services.
It entails how to present prices to customers, how to create a price list and describing how to price a tender for a contract.
Most businesses will need to draw up a price list at some stage. If the sale is that of a fixed range of products, this may be the only form of pricing needed then. This type of standard price list can also be used as the basis for pricing your non-standard orders.
Presentation of Prizes to Customers
Ensure you indicate dates on price lists, particularly if a customer is likely to keep them for a long time. A date should be noted for the expiry of a special offer.
It is also useful to include a clause at the end of the price list stating that prices are subject to change. What should also be made clear is whether any delivery, packing or postage costs are included in the prices.
Preparation of a Written Estimate
When preparing an estimate, it is professional practice to give the customer a written copy, which includes a full breakdown of costs.
The estimate should show the overall price breakdown, a listing of the components of the price schedule, detailing when work will be done or products delivered, the terms and conditions, and the period the estimate is valid for payment terms or schedule.
Preparation of a Written Quotation
Quotations commit one to the price they specify. So it is usually used when the work being quoted for has clear requirements – in terms of time, labor, and materials; when the costs are stable; and when you are confident service or job delivery won’t turn out to be more complicated than expected.
A written quotation should include: overall price, breakdown of the components of pricing, indication of what is covered and what is not, period the quotation is valid, schedule of when a complete job will be delivered, full contact details of your business, and the payment terms or schedule.
Preparation of Price for a Tender
If you provide goods or services to other businesses or the public sector, you may have to compete for contracts by submitting a tender. The way bids are priced makes the difference between winning or losing business.
Pricing is important when submitting a tender, but you have to keep sight of the quality of goods or services to be provided.
Clients often consider the lifetime cost of the products and services they buy. This includes the initial purchase cost, along with other factors such as maintenance costs, downtime costs, and the cost of consumables and disposal.
It is therefore in the best interest of the supplier to give a detailed breakdown of pricing, as this helps to win contracts by showing that you offer goods or services of value.
The following should therefore be put into consideration: a breakdown of component costs at each stage of the project, staff time and costs, management time and costs, administration time and costs, estimates of reimbursable expenses.