Supplier quotes are often impossible to compare directly. One supplier says “12,200 including VAT”, another says “10,000 excluding VAT”, a third adds delivery later, and a fourth hides the rate in a note. The cheapest offer may simply be the one formatted most attractively.
Short answer
- Decide what you compare: gross amount payable or net amount before VAT.
- For each supplier, mark whether the quoted price includes or excludes VAT.
- Check the rate and extra costs: delivery, installation, packaging, fees.
- Convert every offer to the same base.
- Never compare one VAT-inclusive price with another VAT-exclusive price.
Two valid comparison bases
There are two practical ways to compare supplier prices.
The first is the gross amount payable. This is useful when cash outflow matters most.
The second is the net amount before VAT. This may matter when accounting treats VAT separately and you need to understand the underlying cost.
Bad comparison:
Supplier A: 12,200 including VAT
Supplier B: 10,500 excluding VAT
Conclusion: B is cheaperThat conclusion is too early. If 22% VAT is added to 10,500, the gross amount becomes 12,810.
Example comparison
Supplier A:
Gross price: 12,200
VAT rate: 22%
Net price: 10,000
Supplier B:
Net price: 10,500
VAT rate: 22%
Gross price: 12,810
Result: if comparing gross amount payable, Supplier A is cheaper.What to extract from each quote
Before comparing, collect the same fields:
- supplier name;
- unit price;
- quantity;
- VAT-inclusive or VAT-exclusive status;
- VAT rate;
- gross total;
- delivery and extra services;
- currency;
- quote validity date;
- payment terms.
If one quote is in a different currency, handle exchange rate and date first. VAT math will not fix a currency soup.
Common mistakes
| Comparing gross with net | one offer looks artificially cheaper | normalize to one base |
|---|---|---|
| Ignoring delivery | final purchase costs more | include mandatory charges |
| Missing different rates | total does not match | check line items separately |
| Comparing different quantities | conclusion is useless | calculate unit cost |
| Using an expired quote | price may no longer apply | record quote date and validity |
Simple comparison table
Supplier | Net price | Rate | VAT | Gross price | Delivery | Payable total
A | 10,000 | 22% | 2,200 | 12,200 | 0 | 12,200
B | 10,500 | 22% | 2,310 | 12,810 | 0 | 12,810This table is easier to approve than “I think this one is cheaper”.
How to document the decision
Before choosing a supplier, record which comparison base you used. In one company the decisive number may be the amount payable today. In another, accounting may care more about the net price, recoverable VAT, delivery terms or payment delay. If that rule is not written down, the cheaper quote can look different to purchasing, finance and management.
A practical note is enough: original quote, VAT rate, VAT amount, gross total, delivery, validity date and the reason for choosing the supplier. This turns the decision from a guess into a checkable calculation.
FAQ
What should I compare if my company can reclaim VAT?
Often both net cost and gross cash outflow matter. Ask accounting which base should drive the decision.
What if a supplier does not charge VAT?
Do not add VAT to their quote unless that is actually how the transaction works. Compare the payable amount and the accounting consequences under your rules.
Should delivery be included?
Yes, when delivery is mandatory or materially affects the total. Otherwise the comparison is incomplete.
Why do totals differ by a cent?
Rounding can happen per line or at the document total. For large purchases, check the supplier's rounding method.