Business Documents
WHY DOES A BUSINESS USE DOCUMENTS?
•A business uses documents to keep a record of the transactions that take place between it, its suppliers and its customers. These transactions include:
-Ordering goods and services
-Returning goods
-Paying for goods and services
-Selling goods and services
-Delivering goods
What is a CREDIT SALE?
•Credit sales are goods and services sold on credit, for which payment will be received at a later date.
•It involves the seller giving the goods to the buyer immediately and allowing the buyer to pay for the goods in the future. (e.g. in 30 days)
Explain QUOTATION
•Once a seller has received an enquiry, they will reply with a quotation.
•A quotation lets a potential buyer know the terms of sale before they decide to purchase goods or services
Explain cash discount
-may be offered to encourage the buyer to pay within a certain timeframe.
For example, 5% cash discount if paid by 31 March.
Explain trade discount
-A trade discount is a percentage reduction in the retail price of goods. This discount may be offered when goods are being bought in bulk or to regular customers.
For example, 20% trade discount on €500 worth of goods would be a reduction of €100 for the buyer.
(500 ÷ 100 x 20 = 100)
List 5 Business Documents
Statement
Credit Note
Receipt
Invoice
Delivery Docket
Order
Quotation
Letter of Enquiry
Explain creditworthiness or credit status.
how likely the buyer is to pay within the agreed credit terms. This is known as checking a customer’s creditworthiness or credit status.
What is an Order?
•When the buyer has selected the most suitable quotation, they place an order, which is a request for goods or services to be supplied.
•An order can be completed in hardcopy and sent to the seller, although it may be quicker to place the order online. Once this is done, the buyer will receive confirmation that the order has been received and is being processed.
What is a delivery docket?
DELIVERY DOCKET
•When the ordered goods are ready, they will be delivered to the buyer. The buyer will be asked to sign a delivery docket as proof that the goods have been received. This docket is often shown to the customer on an electronic pad, which can be signed.
What is an INVOICE? List 3 things that would be on an invoice
•If the buyer does not pay for the goods when they are ordered or delivered, the seller will issue an invoice.
•An invoice is a bill for goods or services supplied. It includes the following information:
-Details of the goods or services provided.
-Trade discount (if any).
-VAT.
-The total amount owed by the buyer to the seller and when it must be paid by.
LETTER OF ENQUIRY, explain
Before placing an order for supplies, a business may contact a number of different sellers to find out what goods are available and how much they cost. The document sent out to the suppliers is called a letter of enquiry.
•Creditworthiness checks can be done by: (list at least 2)
-Trade reference: asking the customer for a reference from some other firm they have done business with to say that they are reliable and have paid their bills on time.
-Bank reference: asking the customer to provide a reference from their bank to say that their finances are healthy.
-Credit status agency: using a specialist agency to gather credit information on a customer.
What is a RECEIPT?
•When the buyer has paid for the goods, they will be issued with a receipt.
•A receipt is proof of payment. It should show the amount paid and the goods purchased.
•The details on the receipt should be carefully checked by the buyer and seller to make sure they are correct.
What is a CREDIT NOTE?
•In the event that a buyer returns goods they have already paid for, the seller will send them a credit note.
•
•This contains information about the goods that have been returned to the seller and the value of the returns.
Explain what is a STATEMENT and why would it be used?
•It is common for buyers to deal with the same suppliers on a regular basis. Suppliers send a statement to their customers to show all of a buyer’s transactions over a period of time.
(i.e. goods purchased and payments made)
•The statement will show the balance owed by the buyer at the end of the period in question and when the amount is due to be paid.
•When received, the statement should be checked by the buyer to make sure the details are correct.
What does Terms of Sale mean?
•Terms of sale refers to the payment and delivery details that a buyer and a seller agree on during a transaction.
What is Effective purchasing?
•Effective purchasing is when a buyer gets quotations from a number of sellers to ensure that they get the best deal on price, quality, terms of sale and delivery.
What is a Hardcopy receipt?
What is a softcopy receipt? Give an example of how you would receive a softcopy
An electronic receipt, example a receipt sent by email.
Delivery Docket is sent by the Buyer or seller?
Invoice is sent by Buyer or Seller?
Credit Note is sent by Buyer or Seller?
Receipt is sent by buyer or seller?
Letter of enquiry is sent by buyer or seller?
Order is sent by buyer or seller?
Seller to buyer
Seller to buyer
Seller to buyer
Seller to buyer
Buyer to seller
Buyer to seller
List 5 things a Letter of Enquiry could ask
•Will the goods be available when they are needed?
•How much will the goods cost?
•Are there discounts for bulk-buying the goods?
(i.e. purchasing goods in large amounts)
•When will the goods be delivered and how much will delivery cost?
•How must the goods be paid for?
(e.g. cash with order (CWO) or cash on delivery (COD))
•Can the goods be bought on credit?
(i.e. can the buyer pay for the goods at a future date)
What does E&OE stand for and explain what it means
•The letters E&OE are often included at the end of an invoice. This means ‘errors and omissions excepted’ and gives the seller the right to correct any errors found on the document.
Explain what VAT stands for and what it means giving an example
•Value Added Tax (VAT) that will be charged on the goods.
• VAT is a government tax that is added to the cost of goods and services.
For example, 23% VAT charged on €500 worth of goods would cost the buyer €115.
(500 ÷ 100 x 23 = 115)
What is ELECTRONIC DATA INTERCHANGE?
•The business documents we have looked at in this chapter are often sent by email, rather than as paper copies.
•
•The electronic exchange of documents between businesses is called electronic data interchange (EDI).
List three advantages of Electronic Data Interchange
•There are a number of advantages to sending and receiving business documents electronically:
-It is fast as documents are received immediately.
-It reduces administration costs.
(e.g. stationery and postage)
-It is environmentally friendly as no paper is used.
-It allows for better stock management as items can be reordered automatically when they fall to a certain level.
-More documents can be kept using data storage than in physical files.
-Electronic records are easier to search and find.