The Power Of Sending Estimates
Why Estimates Are Of Key Importance To Your Business
Estimates are not the same as bills, invoices, and contracts. An estimate is defined as an approximation or rough calculation of costs, which is shared with a client before a project begins.
Also called cost estimation, quote, or budget proposal, an estimation is presented at a stage where the costs are not final but roughly drafted to give the client an idea of what to expect. In the accounting flow, after an estimation is agreed upon, it will typically become a payable invoice.
Here are the key reasons why estimations are crucial for businesses:
- They Can Make Or Break The Relationship With A Client - A clear estimate that includes all relevant information in detail is helpful and insightful and can prevent any future disputes.
- They Help With Forecasting And Managing Expectations - Cost estimates are a major pillar in the art of building projects. Accurate estimations help to stay on top of the financial and legal aspects of any project, and both the business owner and the client will be able to prepare organizationally and financially.
- They Determine The Cost Of Your Goods/Services - Estimates can be tailored to the different needs of various clients. In addition, they grant flexibility for the business owner to enjoy a free-market environment of price determination based on supply and demand.
While it might seem easy to create estimates, there’s actually a lot to it. Here are the top tips for creating an excellent estimate:
Interview The Client First
It’s important to address all questions and the doubts before a project starts.
Keep Markup In Mind
Be clear of all time and costs you may incur, in order to prepare an estimate with your markup built-in.
When an estimate is requested, you should deliver it fast because your competitors might grab the opportunity.
Always avoid making hasty estimations for projects. Create a clear process for solid and reliable quotes.
Add A Bonus
Make a new client feel good after reviewing your budget proposal by adding an introductory offer - typically 5 to 10% off.
Here are some things you shouldn’t do when preparing your estimates.
Do Not Underestimate Your Services
Offering lower rates as bait to close contracts will drain your finances in the long run.
Do Not Treat All Clients The Same
Create custom quotes for each client, tailored to their needs and expectations.
Do Not Make Estimate Hard To Understand
A budget proposal must be easily scannable, concise, and direct.
Do Not Leave Out Details
When it comes to specifications, estimates must be thorough. Itemize all details associated with a project so that the client can make their own forecasts too.
Don Not Forget A Personal Touch
Personalize your estimate by keeping the character of the person or company you are corresponding with in mind.
How To Use Software To Streamline Your Invoicing Process
Creating a quote doesn’t need to be a nerve-wracking affair. Instead of manually making one from scratch, you can use invoicing software to do it professionally and with ease.
You can customize estimates thoroughly using Xero. For example, adding or modifying branding elements is easy when creating project estimates. Xero calls it ‘quotes’, which you can update or revise later on. After the client approves the estimate, you can even convert it to an invoice.
All you need to do to create estimates for clients is to switch on the ‘estimate’ feature on QuickBooks. You can also customize estimations for multiple clients by adding dates and other details. This application also lets you add discounts to estimates in addition to the tax code.
You can easily create billing estimates for new and existing clients using Square up accounting software for weekly, bi-weekly, or monthly periods. Business owners can add notes, terms, discounts, taxes, and more to the estimates, for a high level of customization.
To create an estimate, you can change the title, modify the date, itemize goods and services, attach terms, and specify costs. With Freshbooks you can also add tax details on the estimate before dispatching it.
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If you understand the importance of estimates, follow the tips above, and automate the process, cost estimation will be a breeze for you.
It’s commonly said that communication is the key to a healthy relationship, and in the world of invoicing and transactions, estimates are the ultimate way to communicate with your clients. When everyone is on the same page before money changes hands, you’ll be able to avoid any issues that tend to arise for companies across all industries.
In addition, this simple act of providing a budget proposal can enhance relationships with your customers and increase your bottom line.