Quotation
A quotation is a seller's declaration of intent to supply a (potential) customer with specific goods or services on defined terms – price, quantity, delivery time and payment conditions. It is the first binding sales document and the precursor to the order.
A quotation is a seller's declaration of intent to supply a customer or prospect with specific goods or services on precisely defined terms. It names articles and quantities, prices, delivery and payment conditions as well as a validity period, thereby documenting in a binding way the conditions under which a deal can be concluded. In the sales process the quotation sits between the customer's enquiry and the actual order: if the customer accepts a binding quotation, a purchase contract is formed.
From a business perspective the quotation is the first formal sales document and thus the starting point of the commercial document chain. An accepted quotation becomes an order, order confirmation, delivery note and invoice – without having to re-enter the line items once captured. A quotation is both a communication and a control instrument: it conveys the promise of performance to the customer and provides the company with the data basis to measure the success rate in sales. In the ERP system the quotation is therefore not an isolated document but a document stage closely interlinked with the customer and article master data as well as with order processing.
At a glance
- Binding or non-binding declaration of intent by the seller to supply goods on fixed terms
- Contains articles, quantities, prices, delivery and payment conditions as well as a period of commitment
- First sales document and precursor to the order – acceptance leads to a purchase contract
- End-to-end in the ERP: quotation → order → delivery note → invoice without duplicate entry
- Metric: the quotation win rate (conversion) measures how many quotations become orders
What belongs in a quotation?
A complete quotation unambiguously describes what is to be supplied on which terms. Besides sender and recipient, it includes the quotation number and date, the offered articles or services with quantity and description, the unit and total prices, the disclosed VAT as well as details on delivery time, delivery and payment conditions. In addition, discounts, cash discounts, shipping costs and references to the general terms and conditions are often included.
An often underestimated component is the validity period. It defines how long the supplier is bound to the stated terms and protects against the risk that purchase prices or availability change in the meantime. The more precise and complete a quotation is worded, the lower the subsequent need for clarification – and the more smoothly it can be converted into an order.
Mandatory details and typical line items
For a quotation to be legally sound and comprehensible to the customer, it should contain at least the complete contact details of both parties, a clear description of the service, the price including tax disclosure and the terms. In practice, companies structure the quotation into line items: one article per line with article number, quantity, unit price and line total. At the bottom are the subtotal, tax and final amount. This line-item structure is also the basis for an ERP system to later convert the quotation into an order.
Period of commitment and validity
The period of commitment – for example "valid until 31 Aug" or "30 days from quotation date" – determines how long the supplier is bound to its quotation. Once it expires the commitment lapses, and the customer can no longer accept the quotation without further ado. For the supplier the deadline is an important control tool when procurement prices fluctuate; for the customer it creates planning certainty over the period during which the stated terms apply.
From quotation to order: the process
The typical path begins with a customer enquiry. Sales checks feasibility, availability and pricing and then creates a quotation. This is sent to the customer and – especially in B2B business – often followed up, negotiated and adjusted in several versions until terms and scope are right. If the customer decides to accept, the quotation becomes an order.
At this moment the gap between sales and fulfilment closes: the accepted quotation is converted into an order, acknowledged with an order confirmation and handed over to order processing. From there the document chain continues via picking, delivery note and dispatch through to the invoice. Because all line items were already captured in the quotation, no additional data entry arises – the data moves from stage to stage. If, on the other hand, a quotation is not accepted, it remains documented as "lost" and provides valuable information about price level, competition and sales opportunities.
Why the quotation matters
The quotation is the point at which a non-binding sales opportunity becomes a concrete, measurable business opportunity. The quality and speed of quotation creation directly influence the probability of closing: a fast, professional and complete quotation increases the chance that the customer chooses your own company rather than a competitor. Delays or errors, by contrast, cost orders.
Beyond that, the quotation is one of the most important control variables in sales. The ratio of won to submitted quotations – the quotation win rate – reveals how successfully sales is working and where in the process orders are being lost. Together with the quotation value, this forms the basis for the revenue forecast. A well-maintained quotation portfolio is therefore not just a sales document but also an early indicator of future capacity utilisation and expected revenue.
Quotation win rate as a sales metric
The quotation win rate (also quotation success rate or conversion rate) sets the number of quotations that became orders in relation to the total number of quotations submitted. A low rate points to prices that are too high, unsuitable target groups or weaknesses in follow-up; a very high rate can mean that calculations are too cautious. Combined with the average quotation duration and the quotation volume, this creates a meaningful picture of sales performance.
Quotation in the ERP system
In the ERP system the quotation is the first stage of the sales document chain and builds on shared master data. The customer master supplies addresses, contacts, terms and payment targets; the article master supplies descriptions, sales prices and availability. On this basis a quotation is created in a few steps and – after acceptance by the customer – converted into an order at the push of a button, without re-entering line items.
The benefit of this integration lies in the seamless flow and the ability to evaluate. Every quotation carries a status (open, accepted, rejected, expired) so that sales can see at any time which quotations need following up. Across the entire document chain, prices, quantities and terms remain consistent because order, delivery note and invoice build on the same quotation. Analyses of quotation win rate, quotation value and processing time draw on a uniform data basis – often closely interlinked with the CRM.
Quotation tracking and pipeline
Modern ERP and CRM systems connect the quotation with the sales pipeline: a lead or opportunity turns into a quotation whose progress is tracked via reminders and status. This allows the entire submitted quotation volume to be evaluated as a weighted revenue forecast, and sales can specifically follow up on those quotations that are close to a decision. Seamless quotation tracking prevents open opportunities from lapsing unattended.
Legal classification and DACH specifics
In Germany a quotation is legally an offer within the meaning of Section 145 BGB (German Civil Code). Anyone who proposes the conclusion of a contract to another party is generally bound by this offer – if the recipient accepts it within the deadline, the contract is formed without any further declaration. However, this commitment can be excluded: with a clause such as "subject to change", "non-binding" or "while stocks last", the supplier makes what is known as a non-binding offer that does not bind it and merely constitutes an invitation to order (invitatio ad offerendum) for the customer.
The legally binding offer must be distinguished from non-binding presentations such as catalogues, price lists or shop window displays, which in legal terms are not binding offers but only invitations to submit an offer. In Austria and Switzerland comparable principles of offer commitment apply under the ABGB and the Code of Obligations respectively. For all DACH countries it also applies that if the quotation already contains prices addressed to end consumers, the rules on price indication – final price including VAT – must be observed.
Binding vs. non-binding quotation
A binding quotation obliges the supplier to deliver upon timely acceptance; it is suitable when prices and availability are calculable. A non-binding quotation, by contrast, keeps all options open and makes sense with volatile procurement prices or scarce stock – here the contract only comes about with the supplier's explicit confirmation after receipt of the order.
Example
Example: B2B wholesaler speeds up quotation creation
A wholesaler for electrical supplies long created quotations in a word processor: sales pulled together article numbers and prices from lists, copied customer data from the inventory management system and typed everything into a template. A quotation often took an hour, pricing errors occurred, and after dispatch some quotations were forgotten because no one followed up systematically.
After switching to the ERP's integrated quotation function, the system pulls customer and article data directly from the master data. A quotation with ten line items is ready in a few minutes, including correct prices, discount tiers and period of commitment. Accepted quotations become orders at a click, and the open quotation portfolio appears as a follow-up list. Result: the quotation win rate rose noticeably because follow-up is consistent, and sales gains time for advising instead of creating documents.
Frequently asked questions
Related services
Sources
Questions about Quotation in your ERP project?
We advise vendor-neutrally – and implement it ourselves on request.