Estimate
An estimate is a document sent to a potential customer that outlines the expected cost of goods or services before work begins. It's not a binding invoice—it's a proposal that helps the customer understand pricing and scope. Once the customer approves, the estimate typically converts into an invoice
Estimate Definition
An estimate is a document sent to a potential customer that outlines the expected cost of goods or services before work begins. It's not a binding invoice—it's a proposal that helps the customer understand pricing and scope. Once the customer approves, the estimate typically converts into an invoice.
Estimate in Practice — Example
A landscaping company gets a call from a homeowner who wants a new patio installed. The owner visits the property, measures the space, and sends an estimate for $4,200 covering materials, labor, and cleanup. The homeowner reviews it, approves it, and the landscaper converts the estimate into an invoice in QuickBooks once the work is complete. If the scope changes mid-project—say they add a drainage feature—the estimate gets revised before a final invoice is created.
Why Estimate Matters for Your Books
Estimates bridge the gap between sales conversations and actual revenue. They formalize pricing so there's no confusion when the invoice arrives. For bookkeeping purposes, estimates don't hit your income or accounts receivable—they're informational until converted to an invoice.
That said, tracking estimates gives you visibility into your sales pipeline. If you've sent $50,000 in estimates this month but only converted $20,000 into invoices, you know your close rate and can forecast accordingly. It's a leading indicator of future revenue.
Estimates also protect you from scope creep. When the agreed-upon work is documented, any additions require a revised estimate, keeping both parties aligned and your profitability intact.
How Estimate Shows Up in QuickBooks
In QBO, go to Sales → Estimates to create one. You can add line items, descriptions, quantities, and rates just like an invoice. Once the customer approves, click "Create Invoice" directly from the estimate to convert it. QBO tracks estimate status (Pending, Accepted, Closed, Rejected) so you can filter and follow up. Run the Estimates by Customer report to see outstanding proposals.
Common Mistakes
FAQ
Q: Is an estimate the same as a quote?
A: Functionally, yes. QuickBooks uses "Estimate" but many businesses call them quotes or proposals. They all serve the same purpose—communicating expected costs before work begins.
Q: Do estimates count as income?
A: No. An estimate has no financial impact on your books until it's converted to an invoice and the revenue is recognized.
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