1. Investigating the flow of financial documents
This presentation provides an overview of the key points and financial documents related to ordering, receiving and checking of goods.
Note for tutors:
If you wish to print out these slides, with notes, it is recommended that, for greater clarity you select the ‘pure black and white’ option on the PowerPoint print dialogue box.

2. Stage 1 – obtaining the goods
The sequence of documents:
Buyer makes out order form listing goods and prices.
Seller despatches goods with delivery note.
Buyer signs delivery note as proof of delivery and returns one copy to the supplier.
The buyer may make out a goods received note listing the items received and checked
This slide identifies, in sequence, the first three documents used in a purchasing transaction. Students should note that each document ‘triggers’ some form of action which often concludes with the production of the next document. For example, when a purchase order is received by a supplier, the necessary steps are taken to assemble the goods requested, ready for delivery. When this has happened, a delivery note is produced to be sent with the goods.

3. The order form Quantity Description Item Code Unit price 2 packs of 50
To: Computer Supplies Supplier No: 123
10 Bexley Way Order No: 456
HIGHTOWN Date: 6 June 2002
HG4 7PT
Delivery: 10 June
Signed: Jackie Edwards Designation: Manager
Quantity
Description
Item Code
Unit price
2 packs of 50
Datec floppy disks
DT686
12.99
This document signals the starting point of the purchasing process. It is a formal communication to a supplier that the customer wants to buy the goods specified. Some of the information on the form is pre-printed and some is inserted by the customer. The information inserted is that which is specific to the particular order. All the information contained on the order is important but the section of most immediate interest to the supplier is the amount and type of goods requested. All of the items inserted on the order will be used by the supplier.

4. The order form – key points
Is always on buyer’s headed paper – giving name of firm, address, telephone no, fax, website and VAT registration no (if applicable)
Must be signed to be ‘official’
Must give accurate details of quantity, description, item code and price
This slide summarises the key points relating to orders. Students may like to note that because the document must be on official paper and signed, a faxed order form can be sent for urgent items but a telephone request would not be acceptable.

5. The delivery note Order No Cust a/c no. Despatch date Invoice no.
To: Jones and Kelly Date: 10 June 2002
Riverside Walk
HIGHTOWN
HG2 8PP
Order No
Cust a/c no.
Despatch date
Invoice no.
Delivery method
456
789
20202
Van
A delivery note accompanies the goods when they are delivered to the customer. It lists all the items which are being delivered. It is signed by the person from the customer’s organisation who receives the goods. It is formal proof that the goods have been supplied. If the goods are transported by an external delivery firm or haulage contractor the document is sometimes called an advice note. There are normally three copies of a delivery note or advice note. One is returned to the supplier, one is kept by the delivery firm and one is kept by the customer.
Item code
Quantity
Description
DT686
2 packs of 50
Datec floppy disks

6. The delivery note – key points
Is on seller’s headed paper
Contains no prices
Buyer signs and keeps one copy
Buyer should comment if goods or package is damaged
Received in good condition (or comment here):
Goods received but not checked
Signed: Jackie Edwards Date: 27 June 2002
Please print name here: JACKIE EDWARDS
This slide summarises the key points including the importance of the recipient’s signature. The above example shows the comment which is usually written if the goods are received but cannot be checked on the spot. This is normal as delivery drivers do not wait until a large package has been unpacked and checked. Moreover, goods may be delivered to reception who will then pass the package to the correct recipient unopened. However, if goods are checked on the spot, any damage or items missing should be recorded on the note. Students may be asked to suggest reasons why the recipient has to print their name as well as sign the form. Those with poor handwriting may identify the reason more quickly than others!

7. Goods received note Supplier: Computer Supplies GRN No: 1234/12
10 Bexley Way GRN date:
HIGHTOWN Carrier: Comp Supp
Supplier A/c No: Del note date:
Checker: David Evans
Order No
Quantity
ordered
Quantity delivered
Description
Condition
123
2 packs of 50
Datec floppy disks
One Box damaged - items missing
A goods received note is completed by the person who unpacks and checks the goods at the customer’s business. It records exactly what has been delivered and from which supplier. It is then forwarded to the accounts department which will match up the GRN with the delivery note and with the invoice, when this arrives from the supplier. As with the delivery note, any problems should be noted.

8. Goods received note – key points
An internal document usually used in large organisations
Records items received and any discrepancies/faults
Sent to accounts department so that they know whether the supplier should be paid or not.
This slide summarises the key points of goods received notes. It may be useful for students to understand that not all firms use GRNs. A small company, largely involved in providing a service (eg estate agent, solicitor, accountant) is extremely unlikely to use these. They are normally used in manufacturing businesses where stocks of raw materials are frequently delivered.

9. Stage 2 – payment notification
The sequence of documents:
Seller makes out invoice listing goods, price, discounts and VAT
Credit note is issued if any goods are returned
End of month – seller issues statement of account listing all transactions and balance owing. May include remittance advice slip for buyer to return with payment
This slide lists the key documents relating to payment notification, in sequence. In this case the students should note that all the documents are issued by the seller of the goods and sent to the buyer.

10. The invoice To: Jones and Kelly Riverside Walk HIGHTOWN HG2 8PP
Yr order no
Cust A/c no
Date/tax point
Invoice No
123
789
12 June 2002
20202
Item code
Quantity
Description
Unit price
Net value
DT686
2 x 50
Datec disks
£12.99
£25.98
Terms: net 28 days
Carriage Paid
E & OE
TOTAL
VAT 17.5%
£4.54
TOTAL DUE
£30.52
An invoice is sent from a supplier to a customer after the goods have been delivered. In reality, and on a computerised system, it may be produced at the same time as the delivery note and have a similar layout. The key difference is that the invoice contains details of prices and the amount owing, which the delivery note did not. On the example only one item has been ordered. Had several been requested then these would have been listed separately and, in each case, the unit price and net value inserted. Students should understand that ‘unit price’ relates to the price of one item as quoted in a catalogue. This may be a single item (eg a printer) or a multiple (eg box of 50 disks or box of 1,000 envelopes). The net value is the value of the items but does not include VAT.

11. The invoice – key points
Always on headed paper
Invoice shows VAT registration number
All items listed separately, then totalled
VAT added to sub-total to give total due
Terms = date when payment due
This slide summarises the key points relating to invoices. Students should note that invoices are checked before they are paid – both against the original order and the GRN. The calculations should also be checked before payment is authorised. On a computer package, the amount can be checked against the total to be charged for the order according to the computer records. Any difference should be investigated.

12. Credit note To: Jones and Kelly Riverside Walk HIGHTOWN HG2 8PP
Yr return ref
Cust a/c no.
Date/tax point
Invoice no.
Credit note no. 37
789
14 June
20202
671
Item code
Quantity
Description
Unit price
Net value
DT686
1x 50
Datec disks
£12.99
Reason for return:
Goods faulty
TOTAL
VAT 17.5%
£2.27
TOTAL DUE
£15.26
Credit notes are not needed for every purchasing transaction. They are only used if an amount of money needs to be refunded (credited) to the customer’s account. The calculations are identical to those shown on the invoice.

13. Credit note – key points
Only issued when there is a problem and a refund is required, e.g.
Goods damaged
Incorrect goods delivered – and returned
Fewer goods delivered than charged on invoice
Overcharge on invoice
This slide summarises the main reasons why a credit note may be issued. Students should understand that it is not practical to issue a new invoice (which would confuse everyone). Equally, a refund is not appropriate because nothing has yet been paid! A credit note adjusts the amount owing on the customer’s account, as can be seen on the next slide, which covers the statement of account.

14. Statement of account To: Jones and Kelly Customer a/c no: 789
Riverside Walk Credit limit: £10,000
HIGHTOWN HG2 8PP Date: 30 June 2002
Date
Details
Debit (£)
Credit (£)
Balance (£)
1 June
Balance owing
70.00
12 June
Invoice 20202
30.52
100.52
13 June
Cheque 6060
14 June
Credit note 671
15.26
AMOUNT NOW DUE £15.26
Tutors are advised to work through this slide, line by line, with students. The key points on the next slide can then act as reinforcement. The importance of each customer having a credit limit can be discussed – and the factors which may help to determine this figure. Obviously, the total on the statement should never exceed this figure.
On the 1 June, Jones and Kelly owed £70 from last month which they paid on the 13 June. They ordered more goods which were invoiced on 12 June and on the 14 June a credit note was issued. Two issues are critical for students. They must understand which type of items are entered under the ‘debit’ column and which are entered under the ‘credit’ column. They also need to understand that the final column gives a ‘running balance’ and is always recalculated after each transaction or payment.

15. Statement of account – key points
Sent at end of each month
Starts with any amount owing from previous month
Adds all invoices to amount owed
Deducts all credit notes and payments from amount owed
Ends with current amount due
May include remittance advice slip to be returned to supplier along with the payment
This slide summarises the key points. It is worth students understanding that customers will wait until they receive a statement before they make payment. This saves money in staff time processing payments and in postage. All items on the statement must be checked carefully. On a computerised system, the statement should obviously accord with the record in the supplier’s account for that month.

16. Remittance advice From: Jones and Kelly Customer a/c no.: 789
Riverside Walk
HIGHTOWN HG2 Statement date: 30/6/02
Amount enclosed Cheque no.
Your ref Date of payment
The remittance advice form is often attached (as a tear-off slip) to the statement to make payment easier. This saves the customer having to send a letter (or compliment slip) with the cheque to identify why the payment is being made.

17. Remittance advice – key points
Often tear-off form at end of statement
Customer includes form with payment
Supplier can immediately link payment to customer and statement.
This slide summarises the benefits of a remittance advice form from the supplier’s point of view. No-one wants 50 cheques arriving one morning with no identification except the name and amount! This would mean considerable work for someone linking the cheques to the statements. A remittance advice provides all the information required by the supplier.

18. The sequence of documents:
Stage 3 – making payment
The sequence of documents:
Buyer checks invoice and statement
If correct, normally pays by cheque.
Note: receipts may be issued by seller if cash payments are received for any reason
This slide summarises the sequence of events when invoices and statements are paid. Using a cheque is one of several methods of payment. Other methods are covered in chapter When a customer sends a cheque to a supplier, the supplier pays the cheque into their bank. The money is then transferred from the customer’s bank account to the supplier’s.

19. Cheques – key points Cheques printed by banks
Business cheques include company name
May be completed by hand or printed by computer
Items completed are: date, payee, amount in words and figures
Cheques for large amounts signed by more than one person
Counterfoil states reason for payment
Tutors may wish to refer to the printed cheques in the Student Handbook at this point, or circulate blank photocopied cheques from the Handbook or Teachers’ Resource Pack. Today only small firms write out cheques by hand. They are mainly produced by computer in large ‘cheque runs’ which are undertaken at certain periods. The signatures are stored (with security protection) in an automated system. Other precautions taken to reduce the possibility of fraud include multiple signatures (and specific signatures) required for larger cheques. In some cases, cheques for very large amounts may have to be signed personally by the MD and one/two other senior directors.

20. EASYPRINT MAIN STREET HIGHTOWN
Cash sale receipt
EASYPRINT MAIN STREET HIGHTOWN
Name: John Smith Receipt no.: 123
Address: 2 Windy Road Date: 10 June 2002
Hightown
50 coloured photocopies £5.50
17.5% £0.96
Total paid £6.46
Received by: Paula King
Receipts are common – students will receive dozens each week whenever they pay for goods. A handwritten receipt may be prepared for a particular purpose or by a service company which would not use cash registers (eg a person paying a solicitor’s bill in cash).

21. Cash sales receipt – key points
Proves amount was paid
Should be kept safely in case goods faulty
Normally only issued for cash payments – not required for cheque payments
This slide summarises the key points of cash sales receipts. Their main purpose is to provide proof of payment. It is sensible to keep a receipt safely in case the goods later prove to be faulty as it will be requested by the seller if the goods are returned.