Business Documents And Methods Of Payment In Commerce
BUSINESS DOCUMENT – The enquiry asks if certain goods can be supplied and if so at what price and under what conditions of trade. A quotation is given in answer to this.
The order is sent by the purchaser to the supplier and will contain details of the goods required. It may be a regular orders a printed form is usually us simple letter but for regular orders a printed form is usually used.
The invoice is prepared by the supplier and sent to the purchaser; it contains details of the transactions. It usually gives the names and addresses of the supplier and purchaser, the date of sale, a description of the goods and the terms of sale. One or more copies will usually be kept by the supplier; these may be used as evidence of a contract of sale. Discounts- reductions on the advertised price-are often given for example to regular customers or those that purchase large quantities.
Trade discounts are given to other businesses while on the other hand cash discounts are sometimes given for prompt cash payments.
Credit notes are issued by the supplier when the goods are returned and a refund of part or all of the purchase price is
allowed to the purchaser. This usually occurs when the goods are substandard, if the purchaser has been overcharged or if the goods were sold only on approval. The note gives details of the goods and the amount to be refunded.
Debit notes are issued by the supplier if he has undercharged the purchaser; they are made out for the additional sum required.
Statements are issued by suppliers to large customers usually at the end of each month. They give details of the invoices issued in the period, payments received, and any balances that may exist at the end of the period.
Receipts are often issued when a purchaser makes a payment and gives proof that this payment has been made.
Methods of Payment
1. Credit sales – involve the consumer having use of the goods before he has paid for them. A hire purchase agreement involves the consumer receiving the goods immediately and paying for them through a series of installments, usually on a monthly basis However, although the consumer has use of the goods immediately, he does not legally own them until the final installment has been paid.
If he fails to complete the installments, the goods may be reclaimed from him. Often the deal is effected through a finance company which pays the seller immediately and claims ownership of the goods. The deferred system of credit sales differs from hire purchase in that the consumer immediately becomes the owner of the goods and if he defaults on payments, the seller must sue him to recover the balance.
The advantage to the consumer of buying goods on credit is that he has the use of the goods immediately without having to save first or face the possibility of higher prices due to inflation later. The disadvantages are that the final price is likely to be higher through interest charges and lack of discounts and that the buyer may be tempted to buy goods that he cannot afford.
2. Post Office services – For making payments postal orders for the required amount can be bought from a Post Office, which makes a small additional charge. The name of the payee(the receiver) is inserted and the postal order sent to him. On receipt he will be able to cash it at his local Post Office.
Money orders are instructions from one Post Office to another to pay a specified sum to the payee. A copy of the order is sent by the purchaser of the order to the payee who presents it, on receipt, at the Post Office.
The cash-on-delivery system involves the postman collecting the payment for some item sent through the postal system and remitting the money to the sender.
3. Other methods – include the use of notes and coins, cheques, bankers orders and drafts, and credit transfers.