Views: 35

DOCUMENTS USED IN PURCHASING AND RECEIVING GOODS

In the purchasing process, billing is a crucial part of the ultimate goal: to get paid for the product/service you’ve provided. However, there can be many documents involved in a sale, some are legally required, while others might be useful for your industry, business, or as a personal preference.

Purchase Order

A purchase order (PO) is an official document that buyers send to sellers to document the sale of products and services to be delivered at a late date. This allows buyers to place orders with suppliers without immediately making payment. The seller uses POs as a way to offer buyers credit without risk because the buyer is legally obligated to pay for products and services when they’ve been delivered.

Each PO has its own unique number, known as the purchase order number, to assist both buyer and seller in tracking delivery and payment. Blanket purchase orders are used to commit buyers to purchase products or services on an ongoing basis until a certain threshold is reached.

For larger organizations, the purchase order is the second step in the purchasing process. For people outside of the purchasing department who need something for the business – whether it is something as simple as office supplies or break room supplies – or the IT department needing more servers, the process can begin with a purchase order request, also known as a purchase requisition. This is a document similar to the purchase order that outlines what should be purchased, how many, where the purchase should come from, and so on.

The purchase requisition gets sent to the necessary staff member for approval. If it’s not approved, the approver can provide a reason why it was declined and request edits before approval goes through. Once approved, the purchase requisition coverts to a purchase order and goes to the vendor for approval and processing.

Proforma invoices

Proforma invoices are typically used before the full, final details are known about the sale. Whereas a quote provides more information about what the customer could expect from the sale. In other words, a proforma is used when the customer has committed to the sale.

However, the following points should be kept in mind when working with proforma invoices:

1. It is not a valid document to be used in business accounting
2. A proforma invoice cannot replace an invoice
3. Payment cannot be taken from a proforma invoice

Proforma invoices are commonly used in international trade, when the full details of a sale are not yet known.

When creating a proforma invoice, it’s also important that a few requirements are met:

1. It is clearly labeled as a proforma invoice
2. No numbering system is used

Converting a proforma invoice to an invoice can be a simple process once the details of the sale are finalized. This is especially so with invoicing software, which gives you the option to create a completed invoice with a click.

Invoices  

Invoices are arguably the most essential document when it comes to getting paid. Many businesses cannot function without issuing invoices. Invoices are a legally binding document pertaining to the validity of a transaction.

An invoice is used in business accounting, and as part of bank reconciliation when recording incoming cash flow.

Because it is the central legal document of a sale, there are generally strict guidelines about what must be included on an invoice. This can differ depending on the country in which your business is based. The following information must be provided on every invoice:

1. A unique, sequential invoice number
2. The contact details of the seller
3. The contact details of the buyer
4. The sale and supply dates
5. A description of the products/services
6. Subtotal of the sale
7. VAT (if applicable)
8. Total amount due

A delivery note

A delivery note is a document that is sent with a shipment of goods. It contains details about what is included in the shipment: This typically includes the description, unit, and quantity as is found on the invoice. A delivery note can either include or exclude the prices.

The more important elements of the delivery note are the date and contact details, in the event that there is an issue with the delivery.

Debit and credit notes

When goods supplied are returned or when there is a revision in the invoice value due to goods (or services) not being up to the mark or extra goods being issued a Debit Note or Credit Note is issued by the supplier and receiver of goods and services.

Debit Note

Used when a buyer returns goods to the seller, he sends a debit note as an intimation to the seller of the amount and quantity being returned and requesting the return of money.

A debit note is sent to inform about the debit made in the account of the seller along with the reasons mentioned in it.

The purchase returns book is updated on the basis of the debit note. (In case of return of goods)

Debit note is often used to return goods on credit. A debit note is generally prepared like a regular invoice and shows a positive amount.

Credit Note

Used when a Seller receives goods (returned) from the buyer, he prepares and sends a credit note as an intimation to the buyer showing that the money for the related goods is being returned in the form of a credit note.

A credit note is sent to inform about the credit made in the account of the buyer along with the reasons mentioned in it. The sales return book is updated on the basis of the credit note. (In case of return of goods)

Credit note is generally sent by the seller if the goods are found incomplete, damaged or incorrect. It generally shows a negative amount.