What is a quote?
A priced proposal issued to a customer before an order is placed. A cabinet shop uses it to bid a $12,000 kitchen package before anyone commits.
Definition
A quote is a priced proposal you send a customer before they have placed an order. On the books, this is not a journal and not a ledger account.
A cabinet shop bidding a $12,000 kitchen package uses it so the customer can see the price before anyone commits. Sending the proposal does not record a sale and does not create a receivable.
It does not hit the Income Statement the day it goes out. Revenue waits until a later order is delivered and earned.
Stay with the proposal when you read it. The later order record, the signed agreement, and the bill each belong on other pages.
Where it shows up
P&L: Related to nothing until the quote becomes an order and is earned.
Balance Sheet: Related to nothing sitting as an account.
Cash flow: Related to nothing until a later invoice collects.
See also: Sales Order · Pricing · Bookings
When you look at your Income Statement, the proposal does not print as a line. Revenue shows up only after the kitchen is ordered, built, and earned.
The Balance Sheet does not hold a quote account. Sending the paper does not create a receivable, a deposit, or a liability.
On the Statement of Cash Flows, cash does not move when the proposal is emailed. Cash moves when a later bill on an accepted order collects.
Pricing is the set amount you put on the proposal. Gross margin is what that price leaves after the cabinets and labor, and it is how you check whether the bid is worth taking.
How it works
A typical path starts with a walkthrough of the kitchen. The shop measures, picks materials, and writes a price for the package.
That price is sent as a quote. The customer can accept it, ask for a revision, or walk away.
Stay on that proposal. Do not treat a verbal number, a sketch on a napkin, or the later order record as the bid itself.
If the customer accepts, the proposal becomes an order. Bookings and backlog start at acceptance, not at the moment the bid was emailed.
If the customer never accepts, nothing hits the books. A stack of open proposals is a sales pipeline, not an asset.
Do not post a journal that says "quote." The journal comes later, when the accepted work is billed, deposited, or earned.
A revised bid replaces the earlier number. Keep the version the customer actually accepted so later bills match the price that was agreed.
Payment terms printed on the proposal are still only an offer. A credit application may follow if the customer wants to buy on account after they accept.
Example
North Grain Cabinets walks a $12,000 kitchen package for a homeowner. The shop emails a quote that lists boxes, doors, hardware, and install at that price.
Nothing hits cash, receivables, or revenue when the email goes out. The $12,000 is a proposed price, not a sale.
If the homeowner accepts, the shop converts the proposal into an order for $12,000. Bookings rise by $12,000; the kitchen is now signed work, still not billed and still not earned.
If the homeowner asks to drop a pantry and the shop re-prices at $10,500, the accepted figure is $10,500. The original $12,000 bid is history.
If the homeowner never replies, the proposal expires. The shop still has the cabinets in inventory; it does not have a receivable.
Common mix-ups
A quote is not a sales order. The sales order is the internal record after the customer confirms; this page is the priced proposal that came first.
A quote is not a contract. The contract is the binding agreement; this page is an offer that can still be declined.
A quote is not an invoice. The proposal names a price; the invoice is the later document that actually bills the work.
Related terms
- Sales Order: The internal record of a customer's confirmed order.
- Statement Of Work: The document describing the scope, deliverables, and price of an engagement.
- Pricing: The set price charged to customers for a product or service.
- Bookings: The contract value signed in a period, whether or not it has been billed.
- Contract: The binding agreement that sets what will be delivered and what will be paid.
- Invoice: The document that bills a customer and creates a receivable.
- Payment Terms: The agreed deadline and conditions for paying an invoice.
- Credit Application: The form a customer completes to be approved for terms.
- Gross Margin: Gross profit expressed as a percentage of revenue.
- Backlog: Signed work that has not yet been delivered or recognized as revenue.