One of the crucial parts of running any business organization is to give its customers the pricelist of the products and services they are offering.
The way of providing the prices of the products and services is not static, it varies from business to business.
In the case of the garment business, the price quotation remains the same for every customer the price quotation does not change. These means do use the standardized pricelist.
In the case of automobile repair services, the prepared quotations are altered according to the type of services demanded by the customer.
For example- Car service, changing the color or application of window sticker, etc.
So, the prices are subject to the services required. This type of prepared quotation is done with an estimate or a quotation. These are for the medium scale businesses then there comes large business firms and companies, they have a different way of pricing.
Pricing of the firms operating on a large scale that handles the sinuous tasks is based on the tender document prepared by the customers.
As you read along, you will get a detailed idea about prepare quotations practices involved in the business.
All your questions will be answered as to what to do and how to do it.
What is price listing and how to prepare a price list?
It is the list of price quotations of the offered goods and services prepared for the customers. Businesses that deal with indefinite products maintain the standardized price list. It remains the same for all the customers.
You own a dry cleaners shop and you prepare a price list mentioning the different types of clothes, like military clothing, civilian clothing, household items, and another type of comforter, and provide laundry services and their price with estimate disclaimer.
These will remain the same for each and every customer.
You should focus on the details which need to be cleared to your customers like some special offers, mention the expiry date of those special offers, offers like Buy 2 get 1 free or 10% discount on bulk purchase and the period of such offering needs to be mentioned, whether the price listed are inclusive of packaging costs and delivery charges.
It is important to mention the terms and conditions about the same and put a clause saying prices with estimate disclaimer are subject to changes.
What is a price quotation and how to prepare a quotation?
When it is not viable to work from a standard price, you have to give a price quotation to give quotation.
Price quotation is the statement provided to the interested customers detailing the exact price of goods and services but yes prices subject to change.
For Example, you are a painter and your customer asked you to paint his two-bedroom house and gives you the definite dimensions of the rooms, and told you about the polishing work she requires on almirahs and sofa sets.
You have the full knowledge of the work demanded then you can prepare an accurate list of things required and price them accordingly and tell the customer in case of GST/QST involved.
Both the painter and the customer have full knowledge of the work and the price charged.
To prepare a Quotation, the document should comprise of price, you are charging for the goods and services. It should also include the bifurcation prices leading to the final price.
This includes the details of raw materials, production cost, labor cost, packaging, transportation, etc. It needs mentioning that what are the tasked will be done by you, the time period till when the project continues to exist, and when the project closes for you after delivery of the promised services.
Also, indicate in case of any changes requested in the middle of the project, how much will it affect the pricing when you give a quotation.
This reduces the chance of conflict between them as the exact price when you give quotation which has already been given at the beginning to which the customer agreed and now that cannot be changed until and unless there is some change in work and customer is willing to pay for that changed work.
Give a written quotation to the customer and keep a copy of it to yourself.
The estimate is a roughly calculated approximation of the cost of the goods and services offered. While preparing an estimated one should be aware of the fixed and variable cost.
The estimate is a document consist of a rough estimate of own much a business is going to charge for goods and services. When you provide the estimate, you can charge the customers even more than the price estimates in the document.
This is done to safeguard the business from unforeseen circumstances and to prepare the customer not to get surprised by the rise in prices charged.
For example, you are a painter and a customer has asked you to paint a two-bedroom house but he does not have exact details like the dimensions of the room or any other thing then in such a scenario where you are not sure of the details, you prepare a rough estimate of the cost which can be expected when you complete the job.
The prepared estimate is only informal pricing of the work based on incomplete information. When you actually deliver the services, then the estimated cost can go up as well as down depending on the work.
The estimates are not legally binding, they only provide roughly calculated cost to prices subject to change wording.
Also if you already think that uncertainties are huge, then supply a number of estimates based on the likelihood of different circumstances.
This will avoid disputes between you and your customer.
To prepare an estimate, your estimate should include the details of the business, details of the receiver of the estimate, specify the goods and services offered, estimate the price of each good or service, the totals of estimated price, mention the GST/QST applicability, the date of the estimate, the validity of the estimate by giving time period, how the payment will be made and related issues and terms and conditions of prices subject to change wording.
In order to avoid any conflicts and chaos in the future, it is advisable to get the prepared estimate signed by the customers and thereby acknowledging to have full knowledge of the estimate and agreeing upon the same.
Price Quotation v/s Estimate
Are you confused as to what you should use? Give quotations or send an Estimate?
It’s critically important to know the difference between estimates and price quotations.
After knowing the difference, your confusion will vanish.
- Quotation indicates the exact price of goods and services while estimates are sketchy ideas about the futuristic cost involved.
- In case of dispute, price quotation can be used from a legal standpoint while Estimates is an informal document and can’t be used in a court of law.
Estimates and price quotations should always be given in writing. This makes it easier to solve futuristic problems. Keep copies of the same.
Also, make sure that the customer understands whether he is getting an Estimate or Price quotation.
What is a Tender and how to prepare a Tender?
A tender is a formal proposal to supply particular goods and services, send in the specifications, and stating the prices the company is going to charge. It is done when the large businesses and public sector is involved. Businesses compete with each other by submitting a tender.
If the company wins the tender, their offer is accepted. How you price your bid makes a huge difference and makes you win the contract.
When the contract is put out for the tender, you are provided with the instructions of the client’s specifications.
You need to provide a bifurcation of the costs involved at every successive stage of the project. It could be weekly, fortnight, or monthly.
Even if the detailed breakdown is not requested, do provide it. It gives a good impression on your client that you are giving a comprehensive presentation of your service.
Also, Variable cost, management, administration cost, and time duration. Specify the price both in numbers and words, mention whether the prices are inclusive of GST/QST, in which currency you are dealing it also include the estimate of reimbursable expenses that you will incur on behalf of the customer.
Pricing plays a crucial role in winning a bid.
As a newcomer initially you might face difficulties as you are unaware of the pricing practices, how much to bid, and with no idea about what your competitors are bidding.
Despite the lacking experience, you still have a chance of winning.
Few things need to be kept in mind that is: Don’t price too low that the client becomes suspicious of the quality for the goods and services you are offering and also it will become difficult for you to increase your price in future with this client.
Also don’t bid way too higher than the actual bid you should actually be making, that you are not even considered. Think wisely and price.
Pricing of your tender should be done keeping in mind the viability of the operation with a realistic approach. Focus on providing good quality products and the various benefits which you can offer.
In the race to win, never compromise on your quality services. Because this quality service will attract clients even if you are charging a little higher.