Business documents (1)
GOOD DAY. We are still in Section 4: Legal Aspects of Business. This and next week’s lesson will be covering objectives 8 and 9 as follows:
Students should be able to:
■ Explain why documentation is necessary in business transactions.
■ Prepare business documents for various purposes.
The complete process of supplying goods or services from the initial enquiry to actual payment is called a TRANSACTION. At various stages in a transaction, documents are used.
Documents are necessary in business transactions for the following reasons:
1. Both buyers and sellers of goods need to use certain documents to make sure there is no confusion about what has taken place between them.
2. Without documents, business owners would not know how much trade took place, i.e., they would not know the amount of goods and services sold.
3. Business documents also supply the businessman with information about his customers, suppliers, types of commodities, price, listings, etc.
4. Documents provide for the business’ accounting systems, e.g., the business’ debit and credit positions.
5. For tax purposes, records need to be kept.
6. Fraud is easier to detect when there are business documents.
7. Auditors use documents to check the books of the business.
During the course of the year, the businessman may use several types of documents. The same documents may have a different style of layout for different businesses, according to their needs.
Business documents move in two directions:
■ BUYERS ......... to ............. SELLERS or
■ SELLERS ......... to ............. BUYERS
This is known as the routing of the documents. As you consider the various documents used in trade, also think about the routing of the documents.
Examples and information regarding documents are below:
When people want to buy goods, they normally need to enquire from the seller regarding the availability, price, cost of transportation, etc. This can be in the form of a letter or an enquiry note. The routing is from the buyer to the seller. SAMPLE ENQUIRY LETTER FOR QUOTATION
Greetings from ABCG Insurance Advisors Pvt Ltd!
We are setting up a telesales branch in Janakpuri, New Delhi, and intend to purchase our network solutions from Windtel. The details of the requirements are as follows:
1. Mobile connections 50 good calling plans with minimum rentals.
2. Broadband connections 2 Wi-fi connections with a minimum download speed of 5 mbps.
3. Network boosters 3 providing better connectivity.
4. AMC 2 annual maintenance for the listed products.
Please send in your quotations for our reference for the products and services mentioned above. If suitable, we would like to close the deals as soon as possible.
In response to the enquiry letter or enquiry note, a quotation or price list is sent from the seller to the prospective buyer, giving the information asked for and including other information such as discounts, handling charges and terms of payment.
After the quotation has been received, the prospective buyer may decide that certain goods should be requested and so an order is made. A purchase requisition is an internal order from departments within the business for goods in stock at the business. A purchase order, or order note, is sent externally. Goods can also be ordered by telephone or email, and the letter or order form sent out later. The order form is a form with the requisite headings and is to be filled out by the prospective buyer.
Order forms sometimes have the abbreviations COD (cash on delivery) or CWO (cash with order). CWO is usually stated and required when the customer is new and has not yet established a business relationship with the seller.
This document is routed from the prospective buyer to the prospective seller.
After the order is received, the dispatch clerk is engaged in expediting the order as quickly as possible. The dispatch department will keep a record of the consignment and prepare a copy to serve as advise note to the dispatchee. The advise note is normally sent by post the same day that the goods are dispatched. It warns the person who is to receive the consignment that the goods are on their way. It also gives details of the goods and indicates the mode of transport being used. Some firms send two copies of the advice note with the goods. One of these, when signed, acts as the delivery note. The delivery note is sent with the goods. Sometimes a copy of the invoice (bill) signed by the receiver serves as the delivery note. Any anomalies or errors in the goods delivered are corrected by credit and debit notes. These two documents along with others will be considered in the next lesson on Business Documents 2. Have a great week until then.