Finance illustration Finance theory

The flow of financial documents used in a business purchase

There are a number of documents that flow between a supplier and a purchaser when purchases are made. Initially, the purchaser will want to know about the sorts of products that the supplier is offering and the terms at which these goods will be traded. They therefore send an enquiry asking for details of prices and a catalogue.

 

The supplier will then send a catalogue and usually an order form for the purchaser to fill in. The purchaser looks at the catalogue and fills in an order form. The supplier examines the order and will often send an advice note to say when the goods will be delivered and by what means of transport (this document also sets out terms of payment and when payment is expected by).

 

The supplier will then send the goods together with an invoice (see examples from InvoiceHome), which effectively is the bill for the goods being sold. The invoice sets out the terms of the deal and itemizes the sums to be paid, and any discounts (sometimes extra copies of the invoice are sent e.g. a consignment note which the receiver must sign as proof of delivery). Usually at the end of each month the supplier will send a statement which is the sum of all the invoices that are due for payment.

Before the period of credit has expired, the purchaser should send payment for the goods. The seller should then send a receipt acknowledging that payment has been made.

The following illustration shows the flow of some of the most important documents:


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