Sales Quotation: Meaning, Format, Process, and Best Practices

A sales quotation is often the first serious promise a business makes to a customer.

It tells the customer what you can supply, at what price, under what terms, and within what timeline. But for a manufacturing SME, quotation is not only a sales document. It is connected to costing, material availability, production capacity, lead time, margins, approvals, and future order execution.

A weak quotation process creates trouble later. Prices may be quoted without considering raw material changes. Delivery dates may be promised without checking capacity. Special customer requirements may be missed. Sales may quote one version while production receives another. When the customer finally confirms, the team discovers that the quote was incomplete or unrealistic.

This guide explains what a sales quotation is, what it should include, how the quotation process works, common mistakes, and how AICAN Optiwise helps manufacturers connect quotations with sales orders, inventory, production, and reporting.

Note: This article is for general business understanding only. Pricing, tax, commercial terms, contracts, and legal obligations can vary by transaction. Please consult qualified professionals for specific advice.

What Is a Sales Quotation?

A sales quotation is a formal offer sent by a seller to a prospective customer.

It gives details of the proposed supply, including item, quantity, price, taxes, delivery timeline, payment terms, validity, and special conditions.

A quotation is usually created before the customer confirms the order. Once accepted, it may lead to a purchase order, sales order, or contract depending on the business process.

Why Sales Quotations Matter

Sales quotations matter because they influence both customer trust and internal execution.

A clear quotation helps:

• communicate price and scope
• avoid misunderstanding
• protect margins
• set delivery expectations
• define payment terms
• document special conditions
• support approval workflows
• convert enquiries into orders
• improve sales tracking

For manufacturers, quotations also help estimate material, process, and capacity impact before accepting an order.

What Should a Sales Quotation Include?

A good sales quotation should include:

• quotation number
• quotation date
• customer name and address
• contact person
• item code and description
• quantity
• unit price
• taxes and charges where applicable
• total value
• delivery timeline
• payment terms
• quotation validity
• freight or packing terms
• warranty or service terms if relevant
• technical specifications
• special remarks
• authorized signature or approval

The quotation should be specific enough that the customer can approve it without confusion and the internal team can execute it later.

Sales Quotation Process Step by Step

1. Receive Customer Enquiry

The enquiry may include item details, drawing, quantity, expected delivery, technical requirements, and target price.

2. Review Technical Feasibility

Production or engineering may need to check whether the item can be manufactured with available machines, tools, and process capability.

3. Estimate Cost

Costing may include raw material, process cost, labour, overhead, packing, freight, tooling, subcontracting, and margin.

4. Check Delivery Feasibility

The delivery promise should consider inventory, production load, purchase lead time, and capacity.

5. Prepare Quotation

Sales prepares the quotation with price, terms, and validity.

6. Approve Internally

High-value, low-margin, customized, or urgent quotes may require approval.

7. Send to Customer

The quotation is shared with the customer.

8. Follow Up and Revise if Needed

Customers may negotiate price, quantity, terms, or delivery.

9. Convert to Sales Order

Once accepted, the quotation should convert into a sales order so execution can begin.

Example in Manufacturing

A customer asks for 10,000 fabricated brackets.

The sales team receives the drawing and expected delivery date. Engineering checks manufacturability. Stores checks material availability. Purchase checks raw material rate. Production estimates cycle time. Sales prepares a quotation with price, delivery schedule, validity, and packing terms.

If the customer approves, the quotation is converted into a sales order. Production then works from approved details instead of starting from email threads.

Sales Quotation vs Sales Order

A quotation is an offer. A sales order is a confirmed order.

The quotation may change during negotiation. The sales order should reflect the final accepted terms.

Sales Quotation vs Proforma Invoice

A quotation proposes price and terms. A proforma invoice may be used as a preliminary bill-like document before actual invoice, depending on business practice. The purpose and legal treatment can vary, so businesses should use each document carefully.

Common Quotation Mistakes

Quoting Without Cost Clarity

If cost is guessed, margin can disappear after order confirmation.

Promising Delivery Without Capacity Check

Sales may win the order but production may miss the timeline.

Ignoring Raw Material Price Changes

Quotation validity becomes important when input prices fluctuate.

Missing Technical Details

Small missing specifications can create major disputes later.

No Approval Workflow

Discounts, special terms, or low-margin quotes should be reviewed.

Poor Revision Tracking

If multiple versions are shared, teams must know which quotation was accepted.

How ERP Improves Quotation Management

ERP helps quotation become part of a connected sales and operations process.

A connected ERP can:

• store enquiry and quotation details
• maintain customer and item master data
• support price and tax consistency
• link quotation to sales order
• track pending quotations
• show quotation conversion rate
• reduce duplicate entry
• connect accepted orders with inventory and production
• maintain revision history

Optiwise by AICAN helps SMEs connect quotation, sales order, inventory, production, dispatch, and reporting so every customer promise has operational backing.

Quotation KPIs to Track

Useful quotation reports include:

• quotations sent this month
• pending quotation value
• quotation conversion rate
• average response time
• lost quotation reasons
• high-value quotes pending approval
• quotes nearing validity expiry
• margin by product or customer

These reports help owners understand not only what was sold, but what demand is forming.

Best Practices

Use standard quotation formats.

Capture item codes and technical specifications clearly.

Define validity.

Check costing before quoting.

Review delivery feasibility.

Use approval workflows for discounts or special terms.

Track revisions.

Convert accepted quotations into sales orders.

Review pending quotations regularly.

Founder’s Note

At AICAN, we see quotations as the starting point of disciplined execution. A good quotation protects the customer relationship and the factory at the same time.

AICAN Optiwise helps manufacturers make quotation management more connected, so pricing, order confirmation, inventory, production, and dispatch do not live in separate corners of the business.

FAQs

What is a sales quotation?

A sales quotation is a formal offer from a seller to a customer, showing proposed items, quantity, price, delivery, validity, and terms.

Is a quotation the same as a sales order?

No. A quotation is an offer. A sales order is created after customer confirmation and acceptance.

Why is quotation validity important?

Validity protects the business when raw material prices, costs, or market conditions change.

What should manufacturers check before sending a quotation?

They should check costing, technical feasibility, material availability, production capacity, delivery timeline, and approval requirements.

How does Optiwise help with quotations?

Optiwise by AICAN helps connect quotations with sales orders, inventory, production, dispatch, and reporting for better control.