What it means
A quote may become the basis of a contract, order or customer expectation, so a salesperson who accidentally offers an unavailable item, omits delivery costs, uses an expired price or promises a completion date production cannot meet creates a real obligation. An approval process catches these errors while the offer can still be changed.
It should not make every routine quote wait for a director, because risk-based thresholds keep common business moving. Check scope first by listing the items or services, quantities, specifications, exclusions, delivery location, acceptance criteria and validity period.
A price without a clear scope is difficult to defend later, and for custom work the cost estimate should be confirmed with the people who will deliver it. A low price can be justified for a strategic reason, but the reason and authorised margin exception should be recorded.
Review terms alongside price. A customer requesting extended payment may increase working-capital needs and credit risk, and free installation or urgent delivery has a cost even when shown as zero on the quote.
Taxes, currency, exchange-rate assumptions and escalation provisions may matter, and nobody should invent a legal guarantee to secure a sale. Check capacity and supply before promising a date, because stock may be reserved, a supplier lead time may have changed, or a project team may already be fully committed.
The approval should also identify what happens if the quote is accepted after its expiry. A quote generated from old price data should be refreshed rather than grandfathered without a decision.
Set clear approval thresholds covering discount percentage, gross margin, quote value, non-standard terms and risk category. The reviewer needs enough information to make a decision, including base price, cost estimate, proposed exception and customer context.
Approval should be recorded against a version, because a verbal "looks fine" with no version reference can leave the business unable to tell what was authorised, and a material later change may need renewed approval. After approval, send the right version and preserve the customer response, then compare any purchase order terms that differ from the quote before treating the order as agreed.
A low approval count is not proof of good control if staff are working around the process. Done well, approval protects margin and delivery credibility while allowing sales staff to respond quickly within known boundaries.
In practice
Real-world examples.
Example
A salesperson proposes a 15% discount for a large order. Finance checks the margin and the sales manager approves the documented exception before the quote goes out.
Example
A contractor reviews a custom fit-out quote with the site team and adds an excluded electrical task that had been assumed by neither side.
Example
A distributor refreshes a quote after its supplier changes lead time, avoiding a delivery promise it can no longer keep.
Formula
Calculation
Estimated quote gross margin = (Quoted revenue - Estimated direct cost) / Quoted revenue x 100
Worked example. An invented business quotes $80,000 for an installation with estimated direct cost of $60,000.
- Estimated quote gross margin = ($80,000 - $60,000) / $80,000 x 100 = $20,000 / $80,000 x 100 = 25%.
- If a proposed discount reduces revenue to $72,000 with unchanged cost, the margin becomes ($72,000 - $60,000) / $72,000 x 100 = $12,000 / $72,000 x 100, which is about 16.7%, and may cross an approval threshold.
If the approval rule requires a senior sign-off below a 20% margin, the first quote can be sent under the standard rule, while the discounted version needs a named approver and a recorded reason. This is an estimate. Indirect costs, tax treatment, risk and later changes need separate consideration.Case study
Seen in the real world.
This illustrative and entirely fictional example follows Coral Office, an invented furniture installer. A sales representative promised a customer 50 desks at a promotional price with installation within ten days. The promotion excluded installation, and the warehouse had only 30 desks in stock. The customer accepted the quote and scheduled staff to move, leaving Coral with a costly rush order and an unhappy client.
Coral resolved the immediate issue by discussing a staged delivery and approved adjustment with the customer. It then created a quote approval route. Standard items within set price and delivery rules could be sent quickly. Quotes with discounts, installation or tight dates required a current stock check, an installation estimate and a named approver.
The version sent to the customer was linked to the approvals. The process made hidden costs visible before commitments. The owner could see when a lower margin or faster date was deliberate.
Watch out
Common mistakes.
- Approving only a discount while ignoring scope, delivery and payment terms.
- Reusing approval after a material price or specification change without checking the new version.
- Sending a quote that promises stock or capacity the business has not verified.
Questions
People also ask.
Does every quote need a senior manager's approval?
Not necessarily. Standard offers can follow approved rules, while exceptions should meet clear risk-based thresholds.
What if the customer changes its purchase order terms?
Compare the new terms with the approved quote and resolve differences before accepting the order.
How long should approval remain valid?
Link it to a quote version and validity period, and recheck material changes in price, cost, capacity or scope.
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