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How to use estimates in QuickBooks Online


a friendly handshake between contractor and customer


QuickBooks Online provides tools for creating estimates and converting them to invoices. Here’s how it works.


An estimate is just what it sounds like: an estimated cost prepared before you've agreed to purchase a particular service or order. Estimates are used in all sorts of business models! For example, you may receive one from an auto repair shop for vehicle maintenance, from a dentist for a new crown, or from a contractor if you've ever sought to renovate or remodel your home. An estimate can be a lengthy document spelling out the anticipated costs for materials and labor.


Potential sales like these are multi-step processes. The first step is creating an estimate for your customers. Negotiations or adjustments may take place (i.e., your customer wants to move forward with a less expensive material), requiring you to edit the estimate.


Once your customer approves the estimate, you'll send an invoice. Whether that's a lump sum payment up front, a partial deposit, or collection upon the delivery of work, you’ll want to send an invoice and record a payment when it comes in. Many businesses also find it helpful to see an overview of the estimates they've processed so they can track trends in the life cycle of a project.


The great news? QuickBooks Online can help you automate this process! In this QuickBooks Online tutorial, we'll walk you through creating an estimate, converting it to an invoice, and accepting payment.


Creating an Estimate in QBO is similar to creating an Invoice


If you’ve created invoices through QuickBooks Online, Estimates will come easily. Click New in the upper left and select Estimate. A form like the one pictured below will open.

 


A partial view of an estimate form in QuickBooks Online

A partial view of an estimate form in QuickBooks Online


An estimate form in QuickBooks Online looks like an invoice form, with one major difference. There’s a drop-down list under the Customer field. By default, it reads Pending. Click the arrow to open the list, and you’ll see the other options there: Accepted, Closed, and Rejected. You’ll be able to update the estimate’s status here as it progresses. Sometimes QuickBooks Online does this automatically.


Select the correct customer. If you haven’t worked with this individual or company before, click + Add new. A new customer record will slide out from the right side of the page. You’re only required to enter a Customer display name, which may be enough for a quick estimate. You can come back later and complete the record if the prospect becomes a customer. For a tutorial on updating customer information in QuickBooks Online, click here.


Next to the Estimate date field, there’s a field labeled Expiration date. This should be the deadline you’ve given the customer for the estimate. Deadlines can help encourage a customer to make a decision to purchase, and will prevent a customer from accepting an Estimate that you can no longer fulfill, either because your prices have increased or your availability has become more limited. Complete the rest of the estimate by adding the products and/or services you want to sell. At the bottom of the screen, click Print or Preview to see what your estimate will look like to the customer, then save and print or send it.



QuickBooks Online displays a preview of your estimate.

QuickBooks Online displays a preview of your estimate. You can see that the Expiration Date appears at the top. There’s also space at the bottom for your customer to sign and date the document.



TIP: Depending on your monitor’s display, some of the text in the estimate preview may be distorted. You can download it as a PDF to get a better view, as pictured above. 


How to Check the Status of an Estimate in QuickBooks Online


QuickBooks Online makes it easy for you to see the status of each estimate. Click Sales in the toolbar, then Estimates. Click the down arrow in the Action column next to the estimate you just created. The menu that opens includes several options, including Mark accepted, View/Edit, and Update Status. You can also Send it from here if you haven’t already. If you prefer, you can share the estimate link with customers so they can download, print, or approve it. You’ll see that the estimate’s Status is listed as Pending.


Let’s say your customer has told you that they accept the estimate as is. Select Update Status from the menu. A window opens displaying your options. You can mark it as Closed or Declined, but we want to designate it as Accepted, so click that. (this should occur automatically if you email the estimate to the customer and he or she accepts through the email). QuickBooks Online will then ask for the name of the individual who accepted it and the date. Enter that information and click OK. The Status will now read Accepted.


TIP: If the customer decides not to approve the estimate, update its status as Declined, so you still have a record of it. Don’t Delete it. 


Creating an Invoice from an Estimate 

Creating an Invoice from an Estimate 


How to Convert an Estimate into an Invoice in QuickBooks Online


When the work is done or the product(s) delivered, go back to the Estimates page (Sales | Estimates). Find the correct estimate and click Convert to invoice in the Action column. A window should open asking if you want to invoice:

  • The estimate total.

  • A percentage of each line.

  • A custom amount for each line.


WARNING: You may or may not see these options, since progress invoicing must be turned on. Click the gear icon, then Account and settings | Sales | Progress Invoicing. Check out our tutorial on progress invoicing in QBO here, or let us know if you want to learn more about this option.


After you’ve made your selection, an invoice form will open that contains all of your estimate details. Since it was already accepted, don’t make any changes to it. Just look it over, save it, and send it or share a link with the customer. It will now appear in your list of invoices. 


TIP: In QuickBooks Online Advanced, another type of estimate, called a 'Cost Estimate' is available. This is a relatively new feature exclusive to the Advanced edition of QuickBooks Online that allows you and only you to see the cost markup per row within an Estimate. If this is a feature you think would be helpful for your business, reach out to us about upgrading to QBO Advanced! We can often offer very competitive pricing and help you implement these helpful features.


TIP: To see a detailed breakdown of your estimates, create the Estimates by Customer report.


You should be able to replicate the steps we’ve described here. But estimates and their subsequent invoices can get complicated if, for example, a customer wants changes to an estimate and you have to edit it and resubmit it. It’s very important that you get the bookkeeping right here. We’re available to help you deal with these situations and any others you come across as you continue to use QuickBooks Online.


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