Paying for goods and services

Paying for goods and services

Business partners usually agree on the way payment for goods  and services is to be made before an order is placed. Whichever terms have been agreed upon, it is the invoice that tells the buyer how much he owes th supplier.

The invoice

An invoice is one of the most important documents in business administration.  An Invoice is normally numbered and includes: Names and adresses of buyer and seller

Date of order and the order and the number of the order

Cost of the supplied goods

Terms of business

On British invoices you can also find a VAT Reg No

(Value Added Tax and Registration Number )

At the foot of the invoice, one often finds the letters E. & O. E. which stands for 'Errors and Omissions Excepted'. This means that the seller reserves the right to correct any mistake at a later date.

The pro-forma invoice

A so called pro-forma invoice is  sent to the customer if he wants to know exactly, how much he will have to pay for the goods. In this case the pro-forma invoice serves as a formal quotation. Sometimes an importer needs a pro-forma invoice for customs purposes or in order to obtain an import licence.

Debit and credit notes

If one notices that an error has occurred in an invoice that has been sent away or has been received, one cannot  just cross out whatever is wrong and write over the original figures. What one does is to send

debit notes to add amounts fo the invoice and

credit noes to deduct amounts from the invoice

Statment of account

If the buyer is an trustworthy business partner the seller normaly supplies the goods on credit and expects him to settle his account within an agreed period of time. At regular intervals, the seller sends the buyer statements of account, wich are summaries of the transactions during the period they cover.

Notes and covering letters

Whichever method of payment has been agreed upon there will nearly always be some short notes or covering letters to write. When payment is to be effected by bill of exchange, the supplier should enclose a covering letter asking the customer to accept the draft. The buyer may write a covering letter ot go with his cheque or send a short letter informing the supplier of the fact that a credit transfer has been made.

Acknowledgements of payment

The supplier will frequently acknowledge the receipt of remittance, either he has been asked to do so or simply because he wants to establish the firms goodwill