Template of the Estimate
An estimate (also called a quotation or quote) is a document that sets out the expected cost of goods or services before the work begins. It is not an invoice and does not request payment – instead, it gives the customer a clear picture of what the work will involve and how much it is likely to cost. Once the customer accepts the estimate, it often forms the basis of a contract. After the work is completed, you issue a proper invoice for the final amount.
What should an estimate include?
There is no legal format for an estimate in the UK, but a well-prepared one protects both you and your customer by setting clear expectations from the start. The more detail you include, the fewer disputes you are likely to face later.
Essential information
Document label – "Estimate", "Quotation" or "Quote".
Estimate number – a unique reference for tracking and for linking to the final invoice.
Date of issue – the date the estimate was prepared.
Validity period – how long the quoted price stands (e.g. "Valid for 30 days"). Without this, the customer may accept months later when your costs have changed.
Supplier details – business name or sole trader name, address, company number and VAT number (if registered).
Customer details – name or business name and address.
Description of goods or services – a detailed breakdown of what is included, with individual line items where possible.
Unit prices and quantities – so the customer can see exactly how the total is calculated.
Total estimated cost – the bottom-line figure. State clearly whether it includes or excludes VAT.
Recommended additional information
VAT breakdown – if you are VAT-registered, show the net amount, VAT rate and VAT amount separately so the customer knows what to expect on the final invoice.
Payment terms – e.g. "50 % deposit on acceptance, balance on completion" or "Payment within 30 days of invoice".
Delivery or completion timeline – expected start date, milestones and completion date.
Scope exclusions – what is not included in the estimate (e.g. "excludes scaffolding", "hosting billed separately"). This prevents misunderstandings.
Terms and conditions – cancellation policy, revision limits, liability, intellectual property.
Acceptance method – how the customer should confirm (e.g. "Reply to this email with your approval" or a signature line).
An estimate is not an invoice. Never label it as an invoice or use it to request payment. If the customer pays based on an estimate, you should still issue a proper invoice for your accounting records and the customer's. If you need payment up front before starting the work, issue an advance invoice or a proforma invoice instead.
When and why is an estimate used?
An estimate is issued whenever a customer asks how much something will cost before committing to the purchase or project:
Service-based projects – Tradespeople, freelancers, consultants and agencies regularly provide estimates before starting work. The customer uses the estimate to compare suppliers, get internal approval or set a budget.
Competitive tendering – When a customer invites multiple suppliers to quote, a well-structured estimate helps you stand out and demonstrates professionalism.
Complex or custom orders – For bespoke products or tailored services, an estimate breaks down the work into individual components so the customer can see where the money goes.
Setting expectations before a contract – An accepted estimate often forms the basis of a binding agreement. It protects you against scope creep and gives the customer confidence in the final price.
Budgeting and planning – Customers may request an estimate simply to plan their finances, even if they don't intend to proceed immediately.
Estimate vs. quote – is there a difference? In everyday UK business, the terms are often used interchangeably. Strictly speaking, an estimate is an approximation – the final price may change if the scope of work changes. A quotation (or fixed-price quote) is typically a firm offer – the price will not change unless the customer requests additional work. If you want the price to be binding, label the document "Quotation" and state clearly that the price is fixed. If you need flexibility, use "Estimate" and note that the final amount may vary.
Always set a validity period – material prices, labour rates and exchange rates change. A validity date (e.g. 14 or 30 days) protects you from being held to an outdated price.
Be specific about scope – vague descriptions lead to disagreements. List exactly what is included and, just as importantly, what is not.
Use the same numbering for the invoice – reference the estimate number on the final invoice so both documents are easy to match.
Keep copies for at least 6 years – estimates form part of your business records. HMRC requires you to retain records for a minimum of 6 years.
