Estimate vs Invoice: The Underlying Differences

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An estimate is an approximate value given before working out the scope and timelines in a contractor’s life.

On the other hand, invoices are sent across with exact values after the entire work is completed; invoices are more like account statements sent to the company/individual owner for the task done.

While one relies on judgment, the other is more exact based on the essential things done. However, this is just a superficial explanation of both words.

We will go slightly deeper into this with our article by telling you the exact differences between estimate vs invoice, when they are used, and how to use them.

The Purchase Process

purchase process

To understand the main difference between an estimate and invoicing, let’s first understand the purchase process or the cash flow process.

A close look at this purchase process, and you notice that businesses approve the work only after getting an estimate. On the other hand, commercial invoices are raised only after the approval of the purchase orders.

This clearly states that an invoice and an estimate are entirely different.

Can You Use An Invoice as an Estimate?

The answer to this question is both yes and no. If your estimate matches precisely with the work you did and the amounts you had entered, then your estimate becomes your formal document for the invoicing.

However, if there is a slight difference in the two amounts, your invoice will be completely different. Invoices are based on the actual work done by you.

In most cases, the estimate doesn’t become your actual bill, as the actual work and the total amount in the final invoice differ from the calculations in the real world.

  1. What is an Estimate?

    As discussed earlier, the preliminary estimate is a judgment of the costs involved and timelines for a particular work. It states a rough idea of how much time each job will take, the resources involved, and the total amount of the different sub-tasks.

    Say you are a painting contractor. You have been asked to complete painting work for an entire house. How will you start?

    The customer decides the scope of work…Start by knowing the size of the house and what kind of painting work they need.

    Once you completely understand the work that needs to be done, you will begin working on the estimate.

  2. Estimate for Painting Work

    painting work estimate

    Cost of paints: $3000Painting of one wall: $300

    Labor charges: $200 (per person per day)

    Cost of equipment: $1000

    This is a rough estimate of the cost of the work. It includes the resource charges and provides an idea of the cost of the work.

    How does this help the client?

    It helps them decide whether they want to continue with the contractor for the painting work. The estimate helps the customers know if the job is well within their budget or not.

  3. Is Estimate a Bill?

    No, an estimate is different from an actual amount. We just saw how an estimate appears and what it does for the client.

    Let’s take a look at the total amount sheet. How does it work?

    estimate template

    This is the actual work or cost for the work that you did. If you look at the actual cost, it includes the completion date of the work, the price per unit (if needed), the total costs, the kind of work that you did, and the taxation and other inclusions.

    A detailed bill includes actual costs and works done. It doesn’t offer an approximation of things. It is sent after the work is done. As a result, you will need to treat project estimates and bills as different things.

    Things that an invoice should include:

    1. The business name, identity, and other related information of the contractor
    2. The client’s business/individual name along with related information
    3. The date of creation
    4. The due date (by when to pay the dues)
    5. The description of all the purchases made, work done, and schedules followed
    6. In case of unit purchases of the line items and other details, you should write the quantities and prices
    7. Taxes and further information should also be mentioned
    8. Lastly, include payment terms and conditions, if you have agreed to that

    What is the Difference Between Estimate and Invoice?

    We already know what estimates mean and how it helps small businesses. It gives an approximate for the job to be done.

    The invoice differs from the estimates in how it includes the cost of the job to be done. It details (more like an exact price) the job to be done.

    It includes everything from the timeline to the resource and employment. It also includes the line items for the job.

    The client usually confirms the costs in the estimates before the parties can move ahead. The quotations, on approval, can lead to the creation of a purchase order. While the invoice is generated after the job is done for the payment of the services that were provided.

    How do I Convert an Estimate to an Invoice?

    You will need to add the more accurate values and other invoice elements to convert estimates to invoices.

    For instance, estimates will not have details of the date of completion and line items along with the purchase units. You might have to add those details. Similarly, the taxation information needs to be added separately to the invoice.

    You can use software tools to convert the estimate to an invoice. Click on “Convert to invoice,” add the necessary details, and your estimates are a detailed document for an invoice.


    When you settle the accounts with your customer, the estimate is considered. You need to ensure that the estimation of the amount matches the exact amount. It helps release the payment in a timely manner and helps with project management.

    Document your entire estimation and business costs properly for organized project management.

    Make sure you use InvoiceOwl, the most popular construction estimating software to enhance the overall estimating and invoicing process. It will streamline and fast-track the process of creating estimates and invoices in just a few clicks. Not only this, you can manage your all created estimates and invoices in one place and access them on the go as you need them.

Author Bio
Jeel Patel
Jeel Patel

Jeel Patel is the founder of InvoiceOwl, a top-rated estimating and invoicing software that simplifies the invoicing and estimating processes for contractor businesses. Jeel holds a degree in Business Administration and Management from the University of Toronto, which has provided him with a strong foundation in business principles and practices. With understanding of the challenges faced by contractors, he conducted extensive research and developed a tool to streamline the invoicing and estimating processes for contractors. Read More

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