Business Documents

Business documents also called business forms are

- a firm's official documents that are used in transacting business.

- used for reference purposes in the case of queries from customers.
- generally have certain standard formats, but some business will use different types of heading, logo etc to represent their
firms.
- Saves time as the relevant information is contained in the documents and can be easily located and extracted.

Requisition (Stock)

- is a documents used within an organization to request goods from the firm's storeroom or stockroom.
- must be approved by a supervisor, Head of Department or Manager.
- helps to control stock within an organization
- filled out when goods are required
- is prepared in duplicate - one copy is sent to the stores and the other copy is kept on file.
- First step in the request process.

Letter of Enquiry

A purchasing officer may need to buy an item or several items not in the stores. He may choose to send a letter of enquiry
because the item may not be a regular one or he may need more information from the seller before deciding to purchase the
items. The letter of enquiry may request the following information:

(a) details of the goods (e) payment procedures

(b) prices (f) spare parts availability
(c) delivery period (g) warranty
(d) terms of payment

Catalogue

These are reference booklets printed sometimes in colour, giving description of goods. Description may include:

- size
- colour
- price
- reference number for each item

The aim of the catalogue is to make buyers fully aware of available goods so that orders and purchases can be speedily
administered.

Tenders and Estimates

Tenders are competitive bids which are usually invited by a private company or Government institution for a project to be done.
A Company applying for the tender must give in writing an estimate/expected cost for the job to be done. Tenders are common
in the construction industry.

Quotations

- are sometimes termed estimates as they provide details of the prices for the items to be sold or for professional work to be
done.
- may be in the form of a letter, price list or a brochure.
- also give details of discounts offered.

Purchase Requisition/ Purchase Order

Orders are made after the customer is aware of the availability of goods and the prices. It sets out

- details e.g. quantity, description, price of goods to be purchased

- carries an order number and date and has to be authorised.
- the address of the buyer and seller
- terms of payments
- delivery period
- delivery address

The purchase order will have several copies and will be distributed as follows:

(1) first/original copy goes to the supplier/seller of the goods.

(2) Second copy goes to the store/warehouse that will receive the goods to check off the goods against the order copy.
(3) Third copy sent to the department that requested the goods.
(4) Fourth copy is kept on the records in the purchasing department - reference purpose.
(5) Fifth copy is sent to the Accounts Department for verification before payment is made.

When the purchase order is received, it goes to the selling department of the supplier and several copies of the order are made.

- A copy is places on the customer file

- One copy is sent to the credit department to check credit rating of customer
- One copy is sent to the stores where the goods are identified and prepared
- One copy to despatch for delivery

1
Advice Note

- document sent ahead of the goods to inform the buyer that the goods are on their way and they should expect their arrival.
Advice not shows the following:

(a) Number of the note (f) Terms of payment

(b) Name and address of seller and buyer (g) quantity and description of goods
(c) Date of purchase order (h) unit price and total price of each item
(d) Date of advice note (I) delivery information e.g who the goods should be
(e) Desptach information - mode of transport delivered to.
description of package

Delivery Note

- a document that accompany's delivery .

- It is used when the firm takes responsibility for transporting the goods to the customer.
- Delivery note does not show the seller's prices.
- It contains :
- Note number
- Name and address or the buyer and seller
- - date of the delivery note
- purchase order number
- description of goods
- - terms of payment

Destination Sheet

- is a schedule of deliveries to be made to customers.

- It is used by firms that make many deliveries and must be sign by the person receiving the goods..
- It includes : - name and number of the vehicle
- Names of driver and delivery person
- Destination and mileage
- content of delivery
- date of delivery.

Goods Received Note

- Is used in large organizations that have a department for receiving goods.

- Is prepared when the department is satisfied that the goods received are in good condition.
- Main purpose is to inform the stores, purchases department or the department requested the goods that they have
arrived.

Stock Cards

- used to record the present stock received.

- are updated with the new receipts of goods
- show minimum and maximum levels of each item in stock.
- show the amount of stock received, issued and the re-order level.

Invoice

- is a very important trade documents,

- it I sent from the seller to the buyer to inform him that payment for the goods are due.
- Sales Invoice shows:
- Invoice #
- quantity and description of goods supplied
- individual price
- total amount due
- order number
- name and address of buyer and seller
- terms of payment (including discount)
- error and omission excepted.

Error and Omission Excepted (E&OE)

The letters E&OE are usually shown in the bottom left hand corner of an invoice. BY this the seller is telling the buyer that he
(seller) reserves the right to correct any error made on the invoice at some later date.

Terms/Terms of Payment

- is the condition under which payment can be made. E.g. 5% 10 days, 2% 28 days, otherwise net. These wordings on an
invoice refer to a cash discount which the seller offers, to encourage the buyer to pay the debt promptly. If the amount owed
is paid within 10 days, the seller will allow 5 % off the invoice price. If the buyer take more than 10 days, but less than 28
days to pay, the seller will allow 2% off the invoice price. Where the buyer takes more than 28 days to pay, the terms are
net. In other words no discount will be allowed and the amount owed must be paid in full.

Pro-forma Invoice

an order Looks exactly the same as the invoice except that it has 'pro-forma invoice as the its title. The invoice is sent if the
seller does not know a buyer and may be unsure whether or not he will receive payment; but at the same time, the seller will not
want to miss the opportunity of supplying.

Before despatching the goods, the seller will send a pro-forma invoice, which will charge, for the goods in advance. When
payment has been received, he will deliver the items.

2
Credit Note

- is issued when a customer has been overcharged (incorrect calculations) or where goods received are damaged while
being transported. Also if customers returned goods because they were the wrong colour, size, poor quality etc.
- looks like an invoice and often printed in RED.
- Two copies are prepared - original is sent to the customer and the copy is kept in the Accounts Department.

Debit Note

- issue when a customer is undercharged (incorrect addition), omission of the transportation cost, more goods were sent than
invoiced and the buyer agrees to keep them.

Statement of Account

- when payment for credit goods is due, a statement of account is prepared.

- It shows the buyers transactions with the supplier over a period of time - usually a month.
- Shows any outstanding balance from previous statement.
- Amounts which increase the buyer's debt (debit note) are entered in the debit column.
- Amounts which reduce the customer debt ( credit note) are listed in the credit column.
- The last figure under the amount column is the amount owing.

The Importance of and need for Trade Documents

(1) Documents serve as proof that a transaction takes place.
(2) They serve as past trading patterns i.e. they can help companies to make decisions about quantities and prices.
(3) Trade documents such as receipt or invoice proves that payment was made.
(4) A monthly total of sales documents can tell:

(a) total sales

(b) total revenue from sales
(c) total tax collected
(d) total credit sales

(4) Stock records indicate the quantity of an item that remains unused or unsold

Source and Route of Documents

The source of many trading documents is the seller. The seller issues pro-forma invoices, invoices, dispatch notes, delivery
notes, credit and debit notes and monthly statements of Account. They prepare the document, including all facts, figures, and
other relevant details and then give one copy to the buyer, usually after the supply of the goods or services. Copies of all
trading documents are retained by the seller for later auditing, so that they can be summarized in annual company accounts.
The accounts in turn provide information towards annual tax returns and national trade statistics.

Documents used in Transporting Goods to Internal and External Destination

(1) Import Licence

- is issued by the importing government (Ministry of Industry and Trade)

- gives permission to bring certain commodities into the country
- it can be used to enforce quotas. Quota is Government limits on particular goods allowed to be imported into the
country
- Specifies exactly what is to be imported and in what amount.

(2) Export Licence

- also issued by the exporting Government to traders

- needed before certain goods are allowed to leave a country

(3) Bill of Lading

- document that is passed between the shipping company and exporter or his agent.
- used in the transportation of goods by ship
- it represents the title to ownership of goods
- It shows details of the goods such as:

(a) their destination

(b) port of entry/country of origin
(c) name of the shipping vessel
(d) route to be taken
(e) description of goods - quantity and weight
(f) name and address of exporter and importer
consignor - persons sending the goods
consignee - persons receiving the goods
(g) serves as a receipt for the goods

Three copies of the bills are prepared

I. One is retained by the exporter

II. One is given to the ship's captain
III. One is given to the importer who has to produce his copy to take possession of the goods on arrival.

(4) Airway Bill

3
- similar in purpose as the bill of lading
- used in the transportation of goods or other items sent by air
- it shows the consignor and consignee name and address, telephone, description of the
contents, reference number.

(5) Certificate of Origin

- shows the necessary information that officials from importing countries need to know about the content e.g. raw materials
used in the product.
- Usually accompany duty free goods to confirm that they were produced in the exporting countries, to prevent non-member
of the free trade agreement that is in operation.

(6) Insurance Certificate

Goods to be shipped must be insured for loss. Ship-owners normally insure their cargoes, the cost of which is included in
their charge to their customers.

(7) Free on Board - F.O.B.

This means the cost/price quoted on the invoice included freight (cargo) charges as far as loading the goods on t to the
ship. The buyer will pay insurance, dock fees and transportation cost for delivering the goods to their place of business.

INSTRUMENTS OF PAYMENT

(1) Legal Tenders

Refers to the forms of money which the state declares to be a method for payment. Notes and coins are the best
examples of legal tenders.

(2) Money Order

- Method of payment
- sold by banks to anyone who wish to make overseas payment. Some banks will issue money order for.
the local currency of the country.
- issue by the bank after the buyer has paid the equivalent
- it is easy to cash
- can be endorsed by the payee and transferred to someone else
- available to persons with or without bank accounts.
- can be issued by Post Offices in some countries
- are bought for larger sum than postal order

(3) Telegraphic Money Order

- quick way of making payment locally or overseas

- part of the electronic banking system e.g. money gram
- shows name and address of the recipient and the amount paid.

(4) Bank Draft

- used for large sums of money

- traders in foreign country can make payment using bank draft
- contains the payee name and is cashed at foreign banks chosen by the sending bank.

(5) Credit cards

- allows an individual to purchase goods without having to pay for them at the same time.
- are issued by banks
- credit card holders are billed monthly by the credit card company, which makes its profit by the interest charged to
customers and commission paid by the business owner.

(6) Cheques

a cheque is a written instruction by the drawer to his bank, to pay the sum indicated on the cheque to the named
person/organization.

Parties to a cheque

(a) Drawer - is the person who signs the cheque

(b) Drawee - the bank on which the cheque is drawn
(c) Payee - is the person to whom the cheque is made payable.

Entries on a cheque

(i) date on which the cheque is written

(ii) signature of drawer
(iii) name of the payee
(iv) amount in words
(v) amount in figures

Types of Cheques

4
(1) Open Cheque

- is one which does not have 2 parallel lines drawn across the face of the cheque
- it can be paid into the payee's bank
- can be exchange for cash at the bank on which it was drawn with proper identification.
- can be paid to someone else after the payee signs (endorse) the back.

(2) Crossed Cheques

- have 2 parallel lines drawn across the face of the cheque

- generally has to be deposited into a bank account
- can be open if the drawer signs between the crossing and write 'please pay cash'

(3). Manager's cheque

- is made out by the bank in a person's or company name in exchange for cash and usually done
for large sums of money.
- a fee is charge for this service which is paid at the time of purchase
- service is available to account holders and non-account holders.

(4) Certified cheque

- are personal or company cheque which the bank certifies that the signature, name and the amount drawn
are valid.
- a fee is charged for the service
- the word certified is written on the face of the cheque.

(5) Letters of Credit

- are sent by the bank when an importer (buyer) makes arrangement with the bank to pay the exporter (seller).
- seller does not have to wait until the goods are sold before payment is received.

(6) Promissory Notes

- written promise to pay a person at a particular time, from the date of the note, the sum of money
owing
- are enforceable by law if the debtor refuses to pay.

(7) Bills of Exchange

- document mostly used in foreign trade to settle international debt.

- sometimes used in home trade
- used by an exporter to charge his customer a certain amount which must be paid in a specified
time in a specified currency.
- the bill is dated giving the name of the sender (creditor) and the acceptor (debtor). If the debtor
accepts the charge, he writes the word 'accepted' across the bill and sign his name.

(8) Documentary Credit

- enables the exported to obtain payment before the documents of title/ownership are released to the importer.
The importer (customer) arranges for his bank to guarantee the payment will be made when the documents of
title are handed over.