Of course, every company that runs a business has a procurement of goods or services. Generally, in the procurement of these goods, there are various processes such as demand, supply, and purchase. To make it easier for businesses to take care of these activities, a quotation is needed.
This article will discuss the meaning of quotations, their purpose, types, and examples completely. Let’s have a look at this article.
Definition of Quotation
A quotation is an offering letter that is given to the customer after a request is made. Its general function is as an offer, both about prices or services, that companies offer to customers. Offering letters are often used for business-to-business (B2B) transactions.
In contrast to quotations, quite often people make mistakes in equating them with invoices, the notion of an invoice itself is a document that exists due to sales activities. This document contains the prices of goods, types of goods, VAT, discounts, and so on. Sales invoices work as a form of ratification or approval of the occurrence of sales transactions between the two parties.
Purpose of Agreement Quotation Payment Method
There are several purposes of a payment method agreement, see the following list:
- To be able to manage money going in and out of the company, both from the seller and the buyer. Quotation help company finances to stay within pre-determined budgets, as well as control money coming in and going out.
- Apart from regulating, a quotation also protect buyers from price changes. If at any time the seller suddenly decides to set a price, the buyer will not be affected because the price is still charged until payment is made.
- Quotations also give the buyer about when the items must be paid at the latest. This is useful for avoiding conflicts between buyers and sellers in the future.
Quotation Payment Methods
In addition to containing the price agreement, a quotation also contains the payment agreement between the two parties, both the buyer and the seller. An example of a payment agreement is as follows:
1. Cash on delivery
This payment system is done in cash, right when the ordered items arrive at their destination. This method exists to avoid fraud, both the buyer who is afraid the products will not arrive and the seller whose items are not get paid.
2. Cash before delivery
The cash before delivery payment system is a payment made before the items are sent to the customer. This type of payment is also carried out quite a lot after Cash on Delivery. This payment system is more profitable for the seller because the items to be purchased will be paid first by the buyer.
3. Term of payment
Term of payment is a method of payment by using a period of maturity. Which if the buyer does not meet the conditions, there will be sanctions from the seller to the buyer.
Types of Quotations
Quotations of course have a different role in each transaction. This results in two types of offering letters:
1. Vendor Offer
A vendor offer is an offering letter or agreement document made by a manufacturing company or service company. When there will be an agreement from both the service and manufacturing companies with the vendor. The company will provide an offering letter to the vendor. However, this type of documents is generally used more by manufacturing companies than by service companies.
2. Customer Quotation
With the type of vendor, the Customer’s Quotation is an offer or agreement document that is different from a manufacturing or service company for its customers. When a company wants to make an offer regarding sales to a customer, the company will release a customer’s quotation.
The difference between a vendor’s offer and a customer’s offer can we see from who the offeree is. Depending on each perspective, for example, there is a vendor who wants to make an offer to the company, for the company the offer will be seen as a vendor quotation. And vice versa for the vendor, the offer is a customer’s quotation.
Structure of Quotations
A quotation is an important offering letter that has its writing format. Therefore, each company needs to pay attention to the format of writing quotations carefully so that they can establish maximum cooperation. The following is the correct arrangement or format for writing structure:
1. Opening Section
This opening section contains information about the company. usually in the form of a brief profile of the company. In the opening section also need to promote the company. The goal, of course, is to introduce your company to a second party.
Not to forget, the opening section also needs to be good to attract the interest of the reader, to be able to get further offers. The addition of the company profile section is also we highly recommend to complete various kinds of mandatory letters and other certificates that support the legality of the company and the owner.
2. Content Section
The contents of the letter are the part that contains the details of the quotation. Should we emphasize that the writing must be complete without reducing it a little bit. Starting from the type of offer of product and services, the quantity, the minimum number of orders to the payment method.
The contents of the letter also need additional information or other information at the bottom so that later it can attract interest from potential buyers. Especially in the content section, the details that we fill in must neat and weighty. In particular, if you make a direct quotation.
3. Closing Section
Then in the last part, there is a cover. Fill in the closing section by using sentences that contain high hopes to establish cooperation with potential customers. This also applies to making direct quotations. A direct quotation itself is a direct offering letter.
Don’t forget to add, to be able to continue to attract potential customers, try to attach a document of job documentation that has been done before. In particular, the types of offers previously. The attachment can also be evidence of experience. So that customers will become more interested in making deals.
Read related article: Business Communication — Understanding, Purpose, Process
Using a quotation in the procurement of items can certainly provide various advantages and benefits for the company. The following benefits :
1. Work effectiveness and efficiency
In using a quotation, the entire price and quantity by the company are written on a piece of paper, both from the company and the vendor. It is easier when you need a product or service. That way, it will save time and more because of the effective way of working.
2. Minimize risk
With a quotation, it is possible to minimize the risk of unwanted events or things. For example, such as cancellation of purchases, price changes, stock availability, and so on. If these things happen, it can hamper the procurement process.
3. Regulate the income and expenditure of money
Quotation allows companies to be more organized in managing incoming and outgoing money if the details of the goods are clear. So that the company’s financial condition remains within the predetermined budget.
Here is an example of a quote:
That is the discussion of this article regarding quotations. We can conclude that the offering letter is very important for a business. In addition, a quotation will make both the seller and the buyer profit. Lastly, in business, a quotation is something that is usually given when making an offer for cooperation with other parties. So the equipment must get prepare.
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