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What is an RFQ, and when should you use it?
As a small business owner, you’ll run into many technical terms and acronyms.
An RFQ (request for quotation) is when a company invites bids from contractors or potential suppliers. RFQs can be useful to businesses that outsource the supply of goods and services.
It’s worth knowing the request for quotation (RFQ) meaning in business, and how RFQs can help you.
This article will cover the meaning of RFQ, how it works, and some tips on how to pay suppliers after the RFQ is finalized.
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RFQ meaning and uses
An RFQ is the first step towards securing a deal, be it for a product or service. For this reason, it’s essential to understand what it means, and what an RFQ is for.
What does RFQ stand for?
RFQ stands for request for quotation or request for quote. It can also be used interchangeably with the term IFB (invitation for bid).¹
What is an RFQ for?
Many companies need outside help with sourcing services or goods to fulfill inventory needs. In this instance, an RFQ is a process by which you would find service providers or suppliers.
The RFQ helps to have a quick overview of what each supplier offers, and at what price. You can send a request for quotation to several suppliers, specifying what goods you need. The suppliers can then send back a quote with how much it would cost to order those goods from them.
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The RFQ meaning in procurement, for example, is when the procurement department requests quotes from several suppliers for goods. They can create an RFQ and compare the offers to choose the best supplier for the business.
You can also use the RFQ to get an idea of the realistic cost of goods. If you only use one supplier you may not know if they’re giving you a fair price without comparing them to others.
How does a Request for Quote work?
An RFQ is a part of the procurement process that’s initiated by a company and sent out to suppliers or contractors.
As an example, say you run a clothing brand but you don’t have a current wholesale supplier. You might reach out to Chinese wholesale suppliers with a specific list of products. For example, you may ask for an RFQ for 300 t-shirts with a custom design.
This begins the RFQ process. The wholesale suppliers can then choose to send a quote. You would then look through the quotes received to find the best deal for your business.
| 🔍 Looking for wholesale suppliers? Find out the best wholesale websites to order from. |
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RFP/ RFQ meaning
The RFQ precedes the RFP (request for proposal) process. It outlines the payment terms before the company agrees to work with the supplier.
The RFP helps you identify which options present the best opportunity for the business. It’s during this process that you would discuss the structure of the deal you strike and reach an agreement with the contractor or supplier.
Together, the RFQ and RFP processes mirror the consumer decision-making process. These business processes are in place to make sure that you consider and compare all options to strike the right deal.
You can look at it as the business equivalent of browsing different retailer websites or stores. In both cases, you assess pricing and other incentives before pushing the button and making the purchase.
Pay overseas vendors with Wise
RFQs are often involved when sourcing wholesale goods from overseas. You can get RFQs from several wholesale suppliers and then choose the one that best suits your needs.
Paying overseas suppliers is simple and cost-effective with a Wise Business account. You can pay vendors in their local currency at the real mid-market rate.
| Pay vendors and bills for up to 19x cheaper than PayPal | |
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| Join Wise Business today |
There’s no need to worry about hidden fees and poor conversion rates. Sign up for free and start paying your vendors the Wise way.
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Sources:
Sources checked May 14, 2022.
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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