Estimate vs. Actual in QuickBooks: What's the difference?

In QuickBooks, an estimate is a non-posting quote you send to a client, while actuals are the real, posted transactions that hit your books. The estimate outlines the proposed cost of a project and has no impact on your financial statements; the actuals represent the real income and expenses that determine your profitability.

What is an Estimate in QuickBooks?

An Estimate in QuickBooks is a document created to provide a potential client with a detailed quote or proposal for products or services. It is a preliminary, non-binding document used during the sales and planning phase of a job. Think of it as a forecast. It lets your customer know what to expect in terms of cost and scope before any work begins or any financial commitment is made.

Because estimates are "non-posting" transactions, creating one does not affect your income, expense accounts, or any of your key financial statements like the Profit & Loss or Balance Sheet. Its primary purpose is communication and planning. Once a client accepts the estimate, you can easily convert it into a sales order or an invoice within QuickBooks to begin the billing process, saving you from doing double data entry.

What are Actuals in QuickBooks?

Actuals refer to the recorded, historical financial transactions that have already occurred. These are the "posting" transactions that form the foundation of your accounting records. When you enter an expense, log a bill payment, or record a customer payment from an invoice, you are recording an actual cost or revenue.

These transactions directly impact your financial statements. Actual expenses reduce your net income, while actual income increases it. They are the undeniable financial facts of your business, used to calculate profitability, manage cash flow, and prepare tax returns. Unlike an estimate, which is a prediction, an actual is a record of what really happened.

Comparing Estimates vs. Actuals in QuickBooks

While used together for project-based accounting, estimates and actuals serve fundamentally different functions within QuickBooks. Understanding these differences is key to effective job costing and financial management.

Aspect

Estimate

Actual

Purpose

Projected cost and revenue forecast for proposals and planning.

Recorded, real financial transactions that have already occurred.

Accounting Impact

Non-posting transaction. Does not affect financial statements (P&L, Balance Sheet).

Posting transaction. Directly affects all primary financial statements.

Stage in Workflow

Created at the beginning of a sales or project cycle.

Recorded throughout the project lifecycle as costs are incurred and revenue is earned.

Key Document Type

Quote, Proposal, Bid.

Invoice, Bill, Expense, Check, Sales Receipt.

Can it be Edited?

Yes, can be freely edited or updated until it is accepted and fully converted to an invoice.

No, a recorded transaction cannot be "edited." It must be corrected with a journal entry or voided.

Use in Reporting

Used in project-specific reports like Estimates vs. Actuals Detail and Job Profitability Summary to track variances.

Foundation of core financial reports like Profit & Loss, Balance Sheet, and Statement of Cash Flows.

Purpose and Accounting Impact

The deepest divide between an estimate and an actual is its impact on your books. An estimate is for looking forward. It's a communication tool used to align with a client and an internal planning tool for budgeting labor and materials. It exists outside your official accounting figures. You can create a hundred estimates, and your company's net income will not change by a single cent.

An actual, on the other hand, is for looking back. It's an official record of a financial event. Recording an actual purchase of materials for a job immediately increases your job costs and decreases your cash (or increases your accounts payable). Receiving a client payment on an invoice immediately increases your cash and revenue. These transactions are the building blocks of accurate financial reporting.

Workflow and Conversion

A typical project workflow in QuickBooks starts with an estimate. When the client approves it, you can take several actions:

• Create an Invoice: The most common action is to convert the estimate directly into an invoice. QuickBooks gives you the option to invoice for a percentage of the estimate total, for specific line items, or for the entire amount. This flexibility is perfect for projects with deposits or progress payments.
• Create a Sales Order: In workflows that involve inventory, you might convert the estimate into a sales order to reserve stock before billing.

As you work on the project, you’ll record actuals by entering bills from vendors, recording checks paid for supplies, and logging employee time. Crucially, you must assign these actual costs to the specific customer or job the estimate was for. This is what enables QuickBooks to compare the two.

For example, you create an estimate for a client, "Project Alpha," for $5,000. When you buy $500 of materials for that project, you enter the bill and assign it to "Project Alpha." Now, QuickBooks knows your estimated cost was $0 (if not specified) but your actual cost is $500, giving you real-time insight into your profitability.

Reporting and Analysis

Herein lies the true power of using both features. QuickBooks offers several reports that put your estimates and actuals side-by-side to reveal project performance.

• Estimates & Progress Invoicing Summary by Customer: Shows all your estimates for a customer and how much has been invoiced from each one, helping you track how much is left to bill.
• Job Profitability Summary: This report is a simple overview, showing a list of jobs, their total actual revenue, total actual cost, and the resulting profit.
• Estimates vs. Actuals Detail: This is the most informative report. It breaks down each job line by line, showing the estimated cost, actual cost, estimated revenue, and actual revenue. It includes variance columns that calculate the dollar and percentage difference, instantly showing you where you went over or under budget. Reviewing this report helps you identify which types of costs you consistently underestimate, allowing you to create more accurate quotes in the future.

Estimates have no place on a Profit & Loss statement or Balance Sheet. Those core financials are built exclusively from actual, posted transactions.

Practical Application: When to Use Estimates vs. Actuals

Deciding when to use these features isn't an either/or dilemma; a well-managed set of books uses both in concert. The question pivots to understanding the right time and process for each.

You should always use an Estimate when:

• Quoting a Project for a Client: Any time you are presenting a new job to a customer, create a formal estimate. It establishes a professional tone, clarifies the scope of work, and protects you from miscommunication about pricing.
• Planning Internal Budgets for a Job: Before starting a project, use an estimate internally to forecast your labor, material, and subcontractor costs. This establishes a baseline budget to measure your performance against.
• Managing Projects with Progress Billing: If you bill clients at different stages of a project (e.g., 25% on signing, 50% at midpoint, 25% on completion), the estimate is the master document from which all partial invoices are created. QuickBooks tracks how much of the estimate has been invoiced, so you always know what's outstanding.

You should always record an Actual when:

• An expense has been incurred: As soon as you purchase materials, pay a subcontractor, or use company inventory for a job, you must record it as an expense or bill and link it to that specific job. Delaying this leads to an inaccurate and misleading picture of job profitability.
• Revenue has been earned and billed: Once a project milestone is complete and you have the right to bill the client, an estimate should be converted into an invoice. The invoice is the actual record of revenue you've earned.
• An employee has worked on a specific job: If you use QuickBooks for payroll and time tracking, logging employee hours against a job creates an actual labor cost, giving you a complete picture of your profit margins.

The best practice is consistency. Always create an estimate before work begins, and diligently assign every related expense and payment to that customer or job as it happens. Regularly running the "Estimates vs. Actuals" report—weekly or bi-weekly for active projects—empowers you to catch budget overruns early and adjust course before the project's profitability is compromised.

Final Thoughts

In short, estimates are for planning and proposals, while actuals are for reporting and financial reality. Properly using both features in QuickBooks turns your accounting software from a simple record-keeping tool into a powerful project management and profitability analysis engine. Mastering this distinction is fundamental to accurate job costing.

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