Job Estimates in the United Arab Emirates
A job estimate is a document that lists a projected cost for completing a job for the buyer. It is given to the prospective client during the contract phase and is a document which is used to negotiate the cost between a potential buyer and supplier.
It is usual practice for the prospective client to obtain several job estimates from different suppliers. Since cost is one of most important terms to consider, the job estimate document is used as a basis to choose a supplier based on cost. Despite the price of the job being the primary factor to consider, other terms such as the quality of the purchase should not be compromised.
In addition, the estimate is considered one of the most reliable supporting documents for budget preparation as it is used as a source for updating the budget.
Despite the importance of this document, it is important to note that an estimate is just a guess. It is subject to change and actual figures can be different to the planned or projected costs. In order to prevent losing a client, it is necessary to make due precautions while giving an estimate, as a higher estimate may lead to the result of losing the client to another supplier. Moreover, if the actual cost is considerably higher than the estimate, there will be a higher chance of a dispute taking place between the buyer and seller and may even strain the business relationship between the two parties.
Content of a Job Estimate
Generally, the following items are included in a job estimate:
- A detailed description of the service to be provided
- Detailed break up of itemised costs
- Time needed to complete the job. It is advisable to include a timeline of the steps
- Terms and conditions of the services
- Payment terms if it is a cash or credit offer
- Services excluded from the offer
- Any details of discounts, if offered
- Contact details of the supplier
- A clear statement that the numbers are estimates only and are subject to change
Difference Between an Estimate and a Quotation
The main difference between an estimate and a quotation is that an estimate is always flexible whereas, a quotation is given with fixed numbers. This means that if the supplier were to send a quotation and it is accepted by the customer, the supplier is obliged to fulfill that order with the quoted price irrespective of any higher costs that the supplier might incur. Instead, if sending estimates, this will protect the interests of the seller, as they can always add to and increase the costs of the job later. This is why contractors in the construction industry consistently issue estimates as opposed to quotations.
Tips to Estimate a Job Cost
Here are some tips on how to estimate a job cost:
- Understand the client’s requirements. The best way to give an accurate estimate is to meet the client in person and inspect. In order to have a satisfied customer, the business will need to make sure that they have the competency and sufficient resources to fulfill their order in the best way possible.
- Estimate the costs by detailing the job requirement in steps. This cost estimate must be backed by experience or some input from the market.
- Detail clearly the breakup for the services to be performed and the costs involved for each step.
- There is a need to mention that the estimates are provided based on current market conditions.
- It is always wise to limit assumptions while estimating. As most jobs are not exactly the same as each other, it is good practice to conduct decent research on each aspect of the project estimate.
- Identify subjective areas of the project and allocate optimistic costs. These optimistic costs will cover the supplier since adverse variances may arise later, which would increase the price of the services to be performed.
- It is necessary to mention clearly that it is an estimate only and is subject to variances.
How to Create an Estimate
Method 1: Use our simple estimating & invoicing software for UAE
Method 2: Download a free estimate template for UAE
How to Write an Estimate Email
Since sending emails is the fastest and most flexible way of communication, an estimate is often given via email. A good email estimate contains the following content:
- The scope of the work should be accurately stated
- A price breakup should be given
- A detailed timeline should be given
- Payment terms should be defined
- Detailed company information should be given
- Disclaimer should state that this is just an estimate
Sample Email Template for an Estimate
Subject: Estimate # {XXX}
Hello {Customer name},
Thank you for reaching out and showing your interest in doing business with us!
Based on the initial project layout and understanding, we are pleased to provide the attached estimate for your project.
Please note that the actual cost may be different from the estimate in line with additional requirements and unforeseen circumstances. However, we ensure 100% customer satisfaction with our flexible approach to executing project activities.
Further, If you have additional questions, please contact us at {Phone number / Email}. We highly appreciate this opportunity to work together and look forward to serving you with our services.
Kind regards,
(Your name)
(Your position in the company)
(Your company name)
(Your contact details)
Advantages of an Estimate
Following are some advantages of an estimate:
- Highly accurate estimates can lead to enhanced efficiency in the execution of the project
- Helps to enhance working relations with clients
- Helps to save money by only raising the appropriate finance when needed
- From the seller’s perspective, a highly accurate designed estimate leads to higher conversion
- An estimate helps in project management and helps to control costs by comparing it against a set benchmark
- There are fewer interruptions to the project if everything is accurately planned, including cost
Disadvantages of an Estimate
Following are some disadvantages of an estimate:
- Estimates always involve assumptions that might not be true in all cases
- A good estimate always requires market research and experience and these resources may not always be available
- A bad estimate may lead to misrepresentation of the project. Therefore, there is a risk that a business might decide to not start a project even if it is profitable
- The specification used in the estimate may be different from the actual
- The rates used in the estimate may not be reflective of the market rate
- There may be differences in the project requirement and specification of the estimate which would lead to misrepresentation of the project
Key Challenges in Estimating
Following, are the five main challenges which are faced when estimating a project:
Time constraint
Due to the fact that most of the time, estimates are required quickly, the time available for data collection and validity checks is reduced which may lead to errors in the estimate.
Data availability
Quality data may not be available easily which means that the estimator may need to rely on data obtained from secondary sources. This will impair the overall project quality. In addition, lack of data might lead the estimator to use assumptions which further reduces the quality of the estimate.
Dependence
In many estimates, there is a necessity to obtain estimates from other departments or different suppliers. For example, if you are in the construction business, there may be estimates from architects, engineers, contractors, attorneys and other professional service providers. Due to time constraints and other factors, it might not be possible for an estimator to contact each party to obtain details, so this dependence might impair the overall quality of the estimate.
Quantification of the specification
It may not be easy for the estimator to connect the design change with the change in cost. For example, if estimating a construction project, it may be difficult to estimate interior design costs as these are different for the different looks.
Consistency of data
Data is collected from different vendors or secondary sources to be used in the estimate. However, all of the data may not be comparable. In fact, it may be necessary to modify this data, which may not be an easy task to complete.
As discussed, there may be a multitude of challenges that are involved in making an estimate. These challenges can be tackled by having adequate planning, making sure that sufficient time is taken to give a more accurate and fair estimate as well as serious efforts in the process on the part of the estimator.
Conclusion
A job estimate is a document that contains the projected expected cost of a project. All vendors issue this estimate to potential customers to enable them to decide if they wish to go ahead with the job. In the job estimate, a listing for all project items as well as the expected cost to be incurred for each item will be listed.
The job estimate is used as a basis for negotiation between seller and customer. However, it is prudent for the potential customer to obtain estimates from different suppliers to act in their best interest.
An estimate is different from a quotation, as the acceptance of an estimate does not lead to a contract formed between the two parties. An estimate only means that the customer is ready to work and co-operate on the given terms. However, an acceptance of a quotation, as opposed to an estimate, leads a contract to be formed. That is why it is safe to issue a job estimate rather that a quotation initially, from a sellers perspective.
An estimate is made up of a combination of different elements. Such elements include, details of the service, break up of the costs, terms and conditions, the time required to complete the job, payment modes, and a disclosure that explains that an estimate is subject to change, with time.
The complexity of the estimate depends on how complex the project is. Yet, general challenges faced by an estimator include, time constraints, data availability, dependence, quantification of the specification and data consistency.
Frequently Asked Questions
What is the purpose of a job estimate?
The aim of a job estimate is different depending on the point of view of the supplier and the point of view from a customer. Suppliers give estimates in order to take on projects and carry on their business. Customers obtain an estimate to arrange resources required to complete projects. The customer has the upper hand, as they are the ones that will make a decision by selecting a supplier with the most preferred estimate.
Why is an estimate more important in the construction industry?
Construction is an industry where projects entail a complex process as it involves massive resources throughout the construction period. The estimate will be necessary as it allows for the proper planning of financial resources.
Different types of estimates include the following:
- Bid estimate
- Detailed estimate
- Quantity estimate
- Preliminary estimate
What are the requirements necessary to prepare an estimate?
Following are some of the requirements that are needed to prepare an estimate:
- Project understanding
- Identification of subjective areas
- Cost break up for each step which is backed by market research
- Prior experience with similar projects
CREATE ESTIMATE ONLINE
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