Ch. 20- Managing Business Transactions (documents) Flashcards
DIFFERENT business documents
-Letter of Inquiry (b)
-Quotation (s)
-Order (b)
-Delivery docket (s)
-Invoice(s)
-Letter of complaint(b)
-Credit notes (s)
-Statement of account(S)
-Cheque
-Receipt
General treatments for documents
File a copy
Check name and address are correct
(Use for all)
Treatment: Letter of inquiry
Buyer:
()
Seller:
Send quotation back
Letter of Inquiry
Sent by buyer
To fin information on product and service availability, prices and delivery options
Quotation
Gives information about prices, delivery options, products,discounts and terms of sale. Eg free delivery
Treatment: Quotation
Buyer:
-compare quotations for best deal
-Check terms of sale
-Compare again letter of enquiry
Seller:
()
Order
Request from buyer to seller to send the goods and terms outlined in quotation
Treatment: Order
Buyer:
()
Seller:
-check stock levels
-check credit rating
Delivery Docket
Provides proof that goods were delivered and have them checked before signing docket.
Treatment: Delivery Docket
Buyer:
-Check correct goods delivered
Seller:
-Check details according to the order
Things you would find on a quotation:
-Telephone number
-Quotation number
-Name and address of buyer amd seller
-Description of goods
-VAT
-Trade discount
Invoice
Sent by selller outlining quantity, prices, description of goods and any discounts.
Treatment: Invoice
Buyer:
-Check calculations
-Check goods are correct as per order
Seller:
-Check calculations
-Check details are correct.
Letter of complaint
Only sent by buyer if goods are incorrect, damaged and a replacement or discount are requested.
Treatment: Letter of complaint
Buyer:
- Identify problem
-Check details are correct
Seller:
-Investigate problem
-Check details
Credit Note
From seller to buyer, an alternative to cash.
Can order different goods from that company for same amount.
Treatment: Credit note
Buyer:
-Check credit note price is same as amt. charged
-Check goods listed are goods returned
Seller:
- Check goods listed are goods returned
Statement of Account
Seller to buyer at the end of month outlining money opened (Transactions + money owed)
Treatment: statement of account
Buyer:
-Check calculations are correct
Seller:
-Check all transactions are on statement
-Check calculations
Cheque
Payment from buyer to seller for goods purchased
Treatment: Cheque
Buyer:
-Complete cheque correctly and counter foil (cross-check for safety)
Seller:
-Chcek details are correct
- Check it is signed
Receipt
Proof of purchase
Treatment: Receipt
Buyer:
-Check details correct
Seller:
-Complete receipt
-Check amount is correct
Debit note and treatment
If amount on invoice is incorrect, seller will send a debit note showing correct amount.
Buyer and seller must both check calculations
How to check creditworthiness?
-Ask for reference from bank
-Ask to provide trade reference from other firms they have done business with
-Look at customers accounts
-Pay credit enquiry agency
Why do companies sell on credit
-Encourages people to buy - increase profit
- Match competitions who sell on credit
- gives customers time to raise money to pay for goods
How to reduce bad debts?
- Offer discounts to customers paying early
-Stop selling on credit - only cash
-Take out insurance eg. Bad debts
-Send out invoices early so customers do not forget to pay
How do bad debts affect a business
-reduces profits
-can make business go bankrupt
Mark up formula
Profit/cost price x 100
Effective purchasing
-choose supplier with best deal
Trade discount
Reduction in prices to encourage people to buy in bulk
Stock control
System where you never have too much or too little
- computerised stock system
Stocktaking
Counting amt of stock in warehouse ata particular time
DISADVS of too much stock
-can go out of date
-Money tied up in stock ( not able to be used for anything else)
- Insurance costs are higher
- extra storage space
DUSADVS of too little stock
-loss of sales - no stock to sell
-Less profits
-loss of regular customers to competitors
Optimum level for stock
Best and most efficient level for the firm
Not too high or low
Factors to consider for stock level:
-Storage - do you have enough
-costs- insurance higher when you have more stock
-Level of consumer demand eg Christmas, summer
-Type of stock - perishable or durable
Stockout
Too little stock
Loss of sales
