Business document
Quotation
The supplier's formal offer: this specification, this price, these terms, valid until this date. In most cases it becomes a contract the moment the customer accepts it, without anyone signing anything.
Also called: Quote · Offer · Tender response · Bid · Proposal
- Who sends it
- The supplier's sales or estimating function, after the price has been reviewed by someone other than the person who built it.
- Who receives it
- The buyer's purchasing function, and often an engineer and a finance approver alongside them.
- When it is used
- In response to an RFQ, and again as a revised quotation whenever anything material changes during negotiation.
- Does it bind anyone
- Normally an offer, and therefore capable of being accepted into a binding contract without signature — commonly by the customer issuing a purchase order. The validity period, the stated assumptions and the referenced conditions of sale are the boundaries of what has been offered. A document genuinely labelled and worded as an estimate is usually treated as an indication rather than an offer, but the label alone does not decide it.
What it is
A quotation is a supplier's answer to an enquiry: what will be supplied, at what price, on what terms, and for how long the offer stands. Unlike the RFQ that prompted it, it carries real legal weight — in most jurisdictions it is an offer capable of being accepted, and acceptance forms a contract.
That is the fact most people underestimate. A one-line email saying 'we can do those at £18.70 each' is a quotation. If the customer replies with a purchase order, there is a contract on those terms, including all the terms that were not written down.
Which is why the valuable part of a quotation is not the number. It is the block of stated assumptions and conditions around the number — the quantity it is based on, the drawing revision, the lead time, the delivery terms, how long it stands, and whose conditions of sale apply.
Every field explained — 19 in total
What each field means, a realistic example value, whether you can leave it out, and the thing that goes wrong with it in practice.
| Field | What it means | Example | Needed? |
|---|---|---|---|
| Quotation number and revision | Your unique reference, with a revision that increments each time terms change.Watch out Leaving several revisions live at once means the customer can order against whichever suits them. Every reissue should supersede the last explicitly. | Q-11482 rev 2 | Required |
| Customer's RFQ or enquiry reference | The buyer's reference, so they can match your response to their enquiry. | Against RFQ-2026-0418 | Required |
| Date of issue | When the offer was made. The validity period runs from here. | 14 March 2026 | Required |
| Validity period / expiry date | How long the price stands. After it, the offer can be withdrawn or revised.Watch out Set it shorter than the validity of your own input prices. If a material supplier holds a price for 14 days, a 90-day quote validity is a bet on the steel market that nobody in your company decided to place. | Valid 30 days from date of issue — expires 13 April 2026 | Required |
| Part number, description and drawing revision | Exactly what is being priced, in both parties' numbering.Watch out Quote the revision back. If the purchase order later names a different revision, order entry has something concrete to stop on rather than a suspicion. | NG-44821 (our ref BR-2214) — Mounting bracket LH, drawing NG-44821 rev C | Required |
| Quantity the price is based on | The batch size the unit price assumes.Watch out The single most important assumption on the document, because setup is divided by it. A price quoted at 400 and ordered at 100 is simply the wrong price, and without this field stated there is no way to demonstrate that. | 400 off per delivery | Required |
| Unit price and price breaks | The price per unit, ideally at several quantities.Watch out Price breaks are the cheapest sales technique available and they make your batch assumption self-evident to the buyer. | 100 off £21.40 · 250 off £18.70 · 400 off £17.20 · 1,000 off £15.90 | Required |
| Currency | The currency of the quoted price.Watch out On cross-border quotes, state whether an exchange rate assumption underlies the price and what happens if it moves. | GBP | Required |
| Tooling and one-off charges | Non-recurring costs, quoted separately from the part price.Watch out Amortising tooling into the unit price means never recovering it if the volume does not arrive. If it must be amortised, state the volume it is spread over and what happens if that volume is not reached. | Fixture: £2,850 one-off, payable with order; ownership passes on payment | Conditional |
| Lead time | How long after order the goods will be available, and from what event the clock starts.Watch out State the trigger, not just the duration. 'Four weeks' from what — the order, the drawing approval, the deposit, the first-article sign-off? Each is a different promise. | 28 days from receipt of order and approved drawing | Required |
| Delivery terms (Incoterms) | Who arranges and pays for transport and insurance, and where risk passes.Watch out If the customer asked for delivered pricing and you quote ex-works without saying so, you have quoted a different job to a lower number and will find out at despatch. | EXW our works, Rochdale (Incoterms 2020) | Required |
| Payment terms | When payment is due, and any deposit or stage payment required.Watch out If the customer's RFQ proposed different terms and you do not address it, their terms will usually be the ones that apply. | 30 days net from date of invoice | Required |
| Packaging and freight basis | What packaging is included and whether carriage is in the price. | Standard cartons on ISPM 15 pallets included; carriage at cost if requested | Conditional |
| Quality, certification and testing included | What documentation and approvals are covered by the price.Watch out First-article inspection, dimensional reports and PPAP submissions take real hours. If they are not priced, they will be delivered free. | Certificate of conformity included; PPAP Level 3 quoted separately at £1,240 | Conditional |
| Assumptions the price depends on | Everything the estimate took as given.Watch out The field that protects you, and the one most often left off because the price was 'obvious'. Six lines here settle the arguments that otherwise arrive four months later with an order attached. | Priced on 3m bar stock at current price; single setup per batch; anodising by approved subcontractor; no first-article report | Required |
| Exclusions | What is explicitly not in the price.Watch out An exclusion stated is a conversation now. An exclusion unstated is a concession later. | Excludes: tooling, first-article inspection, carriage, import duty, source inspection attendance | Conditional |
| Price adjustment clause | How the price moves if a named input moves.Watch out The honest alternative to either absorbing volatility or padding the price for it. Buyers accept these far more often than suppliers expect. | Aluminium prices reviewed monthly against LME; ±3% movement passed through | Optional |
| Conditions of sale | Your standard contractual terms, referenced or attached.Watch out Referencing them is not the end of it. If the customer's purchase order attaches their own terms and you do nothing, theirs generally prevail. Acknowledging the order on yours is the step that matters. | Subject to our Conditions of Sale rev 4 (attached) | Required |
| Authorised by | The named person making the offer, with the authority to make it. | R. Meade, Commercial Manager | Required |
A filled-in example
Realistic values throughout — the sort of document that would actually pass through a business.
Quotation Q-11482 rev 2
- Quotation number
- Q-11482 rev 2
- Date
- 14 March 2026
- Against
- RFQ-2026-0418
- Customer
- Northgate Engineering, Sheffield
- Valid until
- 13 April 2026
- Lead time
- 28 days from receipt of order
- Delivery terms
- EXW our works, Rochdale (Incoterms 2020)
- Payment terms
- 30 days net
| Item | Description | Drawing / rev | Qty | Unit price | Total |
|---|---|---|---|---|---|
| 1 | Mounting bracket LH — Al 6082-T6, anodised 15µm | NG-44821 rev C | 400 | £17.20 | £6,880.00 |
| 2 | Mounting bracket RH — Al 6082-T6, anodised 15µm | NG-44822 rev C | 400 | £17.20 | £6,880.00 |
| 3 | Spacer, stainless 316 | NG-44830 rev A | 1,600 | £2.45 | £3,920.00 |
| 4 | Inspection fixture (one-off) | — | 1 | £2,850.00 | £2,850.00 |
- Price breaks, items 1 and 2
- 100 off £21.40 · 250 off £18.70 · 400 off £17.20 · 1,000 off £15.90
- Assumptions
- Priced on 3m bar at current price; one setup per batch per part; anodising by our approved subcontractor
- Excludes
- Carriage, first-article inspection report, PPAP submission, source inspection attendance
- Conditions
- Subject to our Conditions of Sale rev 4, attached. Supersedes Q-11482 rev 1.
What happens next
- 01The buyer compares the quotation against others and may raise clarifications.
- 02A negotiation may follow on price, quantity, lead time or terms — any change should produce a new quotation revision, not a verbal agreement.
- 03If accepted, the buyer issues a purchase order, usually referencing the quotation number and revision.
- 04The supplier checks the purchase order line by line against the quotation before accepting it.
- 05An order acknowledgement is issued confirming what will be supplied, when, and on whose terms.
Where it appears in the chain
- Costing the jobWorking out what the job will cost the company to deliver — material, labour, machine time, tooling, outside processes and overhead — before anyone decides what to charge for it.
- Reviewing and issuing the quotationTurning a cost into an offer: setting the price, having someone other than the estimator check it, writing down what the price depends on, and sending it before the deadline.
- Negotiation and revised offersThe period between the quote going out and the order arriving, when price, quantity, lead time and terms all move — and where concessions get given that nobody downstream ever hears about.
- Receiving the customer's purchase orderThe customer commits. Before anyone celebrates, the purchase order has to be read line by line against the quotation it claims to accept — because the two disagree more often than anyone expects.
- Order entryTyping the accepted order into the system that everything downstream reads from. Every error made here is repeated by production, despatch and invoicing, and is discovered by the customer.
Common mistakes
MistakeA price with no assumptions attached
Why it happens: The customer asked for a number and the fastest response wins. The quantity, revision and delivery terms all stay in the estimator's spreadsheet.
What to do instead: Quantity, revision, lead time, delivery terms and validity on every quotation, including the one-line email ones. It is six lines and it is the whole of your protection.
MistakeOpen-ended validity
Why it happens: No expiry is stated, so the offer arguably stands indefinitely. An order arrives eleven months later at a price built on last year's material cost.
What to do instead: Always state an expiry date, and check validity at order entry rather than trusting it was checked at issue.
MistakeTooling hidden in the unit price
Why it happens: It makes the quotation simpler and the unit price is what gets compared.
What to do instead: Quote tooling as its own line with its own payment terms, or state the volume it is amortised over and what happens if that volume is not ordered.
MistakeQuoting a lead time nobody in operations has seen
Why it happens: The customer asked for four weeks and sales did not want to lose the enquiry.
What to do instead: Lead times come from whoever owns capacity. If they cannot be reached before the deadline, quote the standard lead time and offer to improve it on request.
MistakeNot referencing your conditions of sale
Why it happens: They exist, they are on the website, and nobody thinks about them at quotation stage.
What to do instead: Reference or attach them explicitly, and object in the order acknowledgement to any customer term you do not accept. Silence is normally read as agreement.
MistakeRevising the price verbally and never reissuing
Why it happens: The concession was agreed on a call and everyone remembers it. Order entry works from the last written document, which is the old one.
What to do instead: Every change produces a new revision. Nothing agreed verbally is real until it is on a document with a number.
Terminology
- Offer
- A proposal capable of being accepted to form a contract. A quotation usually is one; an estimate usually is not.
- Validity period
- How long the offer stands. Once expired, the quotation is no longer capable of acceptance.
- Price break
- A table of unit prices at several quantities, making the batch-size assumption visible to the buyer.
- Firm price
- A price that will not change for the stated period, as distinct from one subject to adjustment.
- Battle of the forms
- The conflict when both parties' standard terms claim to apply. Broadly, the last set sent before performance tends to prevail.
- Amortisation
- Recovering a one-off cost such as tooling across an agreed volume rather than charging it up front.
Common questions
›Is a quotation legally binding?
It is normally an offer, which becomes binding when the customer accepts it — frequently by issuing a purchase order, with no signature involved. That is why the validity period, the stated assumptions and the referenced conditions of sale matter: they define the limits of what you have offered.
›What is the difference between a quotation and an estimate?
A quotation is a fixed price for a defined scope and is normally an offer. An estimate is an indication of likely cost where the scope is not fully defined, and is normally not. The difference has to be real, though — labelling something an estimate while giving a precise price for a precise specification will not necessarily protect you.
›How long should a quotation be valid?
No longer than your input prices are held. Thirty days is the usual default. Where a customer demands longer, a price adjustment clause tied to a named index is more honest than either absorbing the risk or padding the price to cover it.
›Can a quotation be withdrawn?
Generally yes, at any point before it is accepted, provided the withdrawal reaches the customer first. Once accepted it is a contract. This is another reason the expiry date matters — it withdraws the offer automatically without anyone having to have the conversation.
›Should you show the customer a cost breakdown?
It depends on the buyer. Large customers increasingly require open-book pricing and refusing can cost the opportunity, but a breakdown invites line-by-line challenge and once a labour rate is disclosed it stays disclosed. Showing major elements — material, process, finishing, tooling — without exposing rates is a common middle position.
›What happens if the purchase order does not match the quotation?
It is a counter-offer rather than an acceptance, and it should be queried before it is entered. Correcting it silently in your own system is the worst option — the invoice will then disagree with the order the customer's accounts payable department approved, and it will not be paid.
Tools for this
Downloadable, self-contained, and yours to keep — they run in a browser with no account and no data leaving your machine.
- Quote & Estimate BuilderFreeBuild professional quotations and estimates for any service or product business. Cost build-up by labour, materials, subcontractors, equipment and travel; overhead recovery, target-margin solver, tiered packages, tax and multi-currency. Runs entirely in your browser. No installation, no account, no
- CNC Quote BuilderFreeBuild machining quotes with quantity breaks: operations, material, outsourcing, tooling amortization, overhead and margin. Runs entirely in your browser. No installation, no account, no upload.
- Gross Margin CalculatorFreeWork out true gross margin, markup and contribution per product or job — including the direct costs people forget. Runs entirely in your browser. No installation, no account, no upload.
Reviewed 2026-08-15. Nothing here is legal, tax or accounting advice — the mandatory content of commercial and tax documents varies by jurisdiction, so confirm the specifics for where you trade.