Understand the key differences between invoices and estimates, and when to use each document in your business workflow.
Many business owners confuse invoices and estimates, but understanding the difference is crucial for professional client relationships and proper bookkeeping.
What is an Estimate?
An estimate (also called a quote or proposal) is a document you send to potential clients before starting work. It outlines:
- What work you'll perform
- How much it will cost
- Timeline for completion
- Terms and conditions
Estimates are not legally binding payment requests—they're proposals that clients can accept or decline.
What is an Invoice?
An invoice is a formal payment request sent after work is completed (or as agreed in your contract). It includes:
- Final amounts owed
- Payment due date
- Payment methods accepted
- Itemized breakdown of charges
Unlike estimates, invoices are legally binding documents that establish a payment obligation.
Key Differences
| Aspect | Estimate | Invoice |
|---|---|---|
| Timing | Before work starts | After work is done |
| Purpose | Propose costs | Request payment |
| Legal Status | Not binding | Legally binding |
| Can Change? | Yes, it's an estimate | No, it's final |
Workflow Example
- Client inquiry: Potential client contacts you
- Send estimate: Provide detailed cost breakdown
- Client approval: Client accepts your estimate
- Complete work: Deliver the service or product
- Send invoice: Request payment for completed work
- Receive payment: Get paid!
Invoice ASAP makes it easy to create both estimates and invoices, and even convert accepted estimates into invoices with one click.