When you run a business, converting an estimate to an invoice is an everyday task that can make or break your cash flow. You’ve outlined the costs and gained buy-in from your client. It’s time to turn that estimate into an invoice so you can get paid.

Most processes for creating estimates and invoices are moving online, and the digital invoicing market’s compound annual growth rate (CAGR) is expected to surpass 22% from 2023 to 2031. Below, we’ll explain how to convert estimates into official invoices, whether you’re doing so on your own or using invoicing software such as Stripe Invoicing.

What’s in this article?

• What is the difference between an estimate and an invoice?
  
• When should you convert an estimate to an invoice?
  
• How to convert an estimate to an invoice
  
• How to use invoicing software to automate estimate conversion
  
• What to include in the invoice after converting from an estimate
  
• How to handle price changes between estimate and invoice
  
• Common mistakes to avoid when converting estimates to invoices
  

What is the difference between an estimate and an invoice?

An estimate is a preview of the potential expenses for a good or service before work begins. It’s meant to help customers decide whether they want the product by showing what they might pay for it. You can adjust estimates if the project’s scope changes.

An invoice is a request for payment that’s sent once the work is done or goods are delivered. It details the final costs, including taxes or discounts, and lays out the payment terms (e.g., due dates, payment methods). Think of it as the official bill that closes the transaction.

When should you convert an estimate to an invoice?

You should convert an estimate to an invoice once the work is complete or the goods are ready to be delivered. If you’re providing a service, wait until the work is finished and approved by the customer. For physical products, wait until the items are packed and ready for shipping or pickup. Then confirm any adjustments to the original estimate so the invoice reflects the final costs accurately.

How to convert an estimate to an invoice

To convert an estimate to an invoice, first double-check the items or services, quantities, and costs on the estimate to ensure they match what was delivered. If changes were made during the project, update these details. Then confirm all costs on the estimate are accurate and include taxes, discounts, or additional fees.

Once the numbers are verified, update the document title from “Estimate” to “Invoice,” and add a unique invoice number. Add in the payment terms (e.g., due date, payment methods) so the customer knows how and when to pay. Afterward, deliver the invoice through your preferred method—whether that’s email, a billing platform, or your accounting software. Follow up with instructions for payment if necessary.

If you’re using an invoicing tool or platform, this usually automates the process. Just click “convert to invoice,” review the details, and send.

How to use invoicing software to automate estimate conversion

Invoicing software such as Stripe Invoicing can make it easier to convert an estimate to an invoice. Here’s how:

• Use Stripe to create a quote that shows your customer the costs up front. This is your estimate—it lays out everything they’ll need to know about pricing before committing.

• Once your customer commits, you can finalize the quote in your Stripe Dashboard. This locks in the details, so you’re ready for the next step without needing to reenter information.

• Convert your finalized quote to an invoice in Stripe by clicking “convert to invoice.”

• Send the invoice to your customer via email. They’ll see the invoice along with payment instructions.

What to include in the invoice after converting from an estimate

After converting an estimate into an invoice, you’ll want to double-check and include:

• Invoice number: Assign a unique invoice number. This helps you and the customer track the transaction.

• Customer information: Ensure the customer’s name, business name (if applicable), address, and contact information are accurate.

• Itemized list of products or services: List each product or service alongside descriptions, quantities, and individual prices.

• Total amount due: Add up the costs, including applicable taxes, fees, or discounts.

• Payment terms: State the payment terms clearly, including the due date and late fees, if applicable.

• Accepted payment methods: Mention the payment options available (e.g., credit card, bank transfer) so your customers know how to pay.

• Notes or special instructions: If there are any final details or reminders, such as instructions for delivery and links to download files, add them.

How to handle price changes between estimate and invoice

Businesses need to clearly communicate price changes between estimates and invoices. Here’s how to manage price changes:

• Update the customer early: As soon as you know a price change is necessary—whether due to changes in scope, materials, or other factors—contact the customer. Explain why the cost is different from the estimate so they’re not surprised when they see the invoice.

• Revise the estimate: If the work hasn’t started, you can adjust the original estimate to reflect the new costs. This way, the estimate will still be accurate and can serve as a clear reference for the final invoice.

• Document changes in the invoice: Include a brief note about the changes when creating the invoice, such as “updated pricing based on additional materials requested” and “cost adjustment for extra hours.”

• Add a “change order” or “adjustment” line: If only part of the estimate changed, consider adding a line item labeled “Adjustment” or “Change Order” in the invoice. This can show the extra charge separately from the original items to clarify what was added or changed.

• Confirm approval before sending: If the price increase is substantial, confirm the customer agrees to the new total before you send the final invoice. This can prevent disputes later.

• Be transparent about discounts or waived fees: If you’ve decided to waive fees to balance out the change, show these as discounts in the invoice. This helps keep the process transparent and shows goodwill.

Common mistakes to avoid when converting estimates to invoices

When converting estimates to invoices, mistakes can lead to confusion, payment delays, or strained client relationships. Here are common errors to avoid:

• Leaving out important details: Ensure all the information from the estimate carries over to the invoice. Missing details—such as item descriptions, quantities, and agreed pricing—can confuse the client and result in payment delays.

• Not updating for scope changes: If the project’s scope or pricing changed, update the invoice to clearly reflect these adjustments. Forgetting to do so can cause discrepancies and disputes when the client reviews the invoice.

• Skipping client approval on adjustments: Before converting an estimate with additional charges, ensure you have the client’s explicit approval. This avoids surprise fees on the invoice, which can affect client trust and delay payment.

• Using the same document number: Always assign a unique invoice number. Using the same number as that of the estimate can create issues with tracking and recordkeeping on both ends. Using unique numbers also helps with accurate reporting and auditing.

• Omitting payment terms: If payment terms weren’t in the estimate, make sure they’re clearly defined on the invoice. Missing information such as due dates, late fees, and accepted payment methods can delay processing.

• Not reviewing for accuracy: Simple mistakes such as typos in pricing, incorrect quantities, and tax miscalculations can lead to back-and-forth with the client. Review everything on the invoice before sending it.

• Forgetting to add discounts or credits: If you offered discounts, waived fees, or applied credits, ensure these adjustments are included on the invoice. This shows you’ve honored agreements made during the estimate phase.