Skip to content
Invoices and collection · 5 min read

Quotation, sales order and invoice: the difference

Three documents people routinely confuse, each with its own moment and its own accounting effect — and knowing the difference prevents half the arguments with customers.

The short answer

A quotation is a proposal, withdrawable, with no effect on the books. A sales order is a mutual commitment once the quotation is accepted; it reserves stock and is not recorded as income. An invoice is a claim for a debt after delivery, and it alone creates revenue and tax. The sequence protects both sides: who agreed to what, when, and at what price.

The steps

  1. The quotation: a proposal with an expiry

    It lists the lines, the prices and how long it stands. That validity period is not a detail: without it a customer returns eight months later demanding a price that no longer exists. A quotation is not recorded in the books because nothing has happened yet — nothing delivered, nothing owed.

  2. The sales order: an agreement before delivery

    It comes into being when the customer accepts the quotation. Stock is reserved for them so it cannot be sold twice, and the agreed quantity and price are settled. It is still not revenue: revenue needs delivery. This is the exact point many systems get wrong, showing sales that have not happened.

  3. The invoice: the claim after delivery

    It is issued after the goods are delivered or the service performed. It is the one that posts to the books: debit receivables, credit sales, credit tax payable. Because it creates a debt it carries a sequential number and is never edited once issued.

  4. And the receipt: proof the money arrived

    Not a substitute for the invoice but what follows it. The invoice says "you owe this"; the receipt says "I received this". A business that issues receipts without invoices cannot know what it is owed, because anything not yet paid leaves no trace.

Common questions

Can the sales order be skipped?
Yes, in an over-the-counter sale: agreement, delivery and invoice happen in one moment. The sales order earns its place when time separates the agreement from the delivery — a scheduled supply, goods ordered in from a supplier, or a project in stages.
Is a quotation binding?
It varies by jurisdiction, and in most it becomes binding once the customer accepts within its validity period. State the period and the conditions clearly, and check your own country’s law where the amounts are large.

Terms used in this guide

More guides

All guides