Understanding Sales Materials and Order Processing in Business
1. Sales Materials and Documentation
Proper documentation is crucial for tracking the movement and transformation of materials throughout various stages of a business, including purchasing, warehousing, manufacturing, and sales. Each change in location or state of an article should be justified with supporting documentation.
A document serves as a structured record of transactions and involved parties, existing in either physical or electronic format. These documents facilitate the administrative flow of business operations related to inventory management, ensuring a smooth supply chain.
Document Flow in Sales
The order fulfillment process typically follows this sequence of documents:
- Client Order: The client initiates the process by requesting goods or services through an order.
- Delivery Note: Upon delivery of goods or provision of services, the vendor issues a delivery note as proof of fulfillment.
- Invoice: The vendor then issues an invoice outlining the payment due for the delivered goods or services.
- Payment: The buyer settles the invoice by the agreed-upon date using methods such as checks, bank transfers, or bills of exchange.
Additional documents may be necessary for handling situations like returns, refunds, or supplementary expenses not included in the initial invoice.
Documents Related to Stock Management
Products entering a warehouse can originate from external suppliers or internal departments within the company. Similarly, outgoing products can be destined for external customers or other internal storage locations. This movement necessitates various documents for tracking and accountability.
External Transactions:
- Sales Orders
- Shipping Documents
- Invoices
- Freight Bills
- Cost Bills
- Credit Notes
- Cash Receipts
- Payment Receipts (Checks, Bills of Exchange)
Internal Transactions:
- Application Forms
- Receipt or Dispatch Notes
- Shipping Orders
- Manufacturing Orders
2. Ordering Goods
When a company requires goods, they can either directly contact their supplier or await contact from a sales representative. Regardless of the initiation method, a written confirmation, such as a letter, is recommended for clarity and record-keeping.
A purchase order is a formal document issued by the buyer to request materials from a supplier. It’s crucial to retain a copy of the purchase order for verification against received goods. Sending two copies to the supplier, with one signed and returned as acknowledgment, is advisable, especially when specific conditions not outlined in a pre-existing contract are involved.
Types of Orders
Firm Order: Issued when the buyer accepts the seller’s terms without reservation.
Conditional Order: Subject to confirmation from either the buyer or seller.
2.1 Order Classifications
Based on Timeframe:
- Normal Order: For goods needed within a short timeframe (e.g., week, month, season).
- Standing Order: For recurring orders of one or more products over an extended period, often based on a preliminary needs assessment and considering factors like minimum stock levels and outstanding supplies.
- Open Order: For an approximate quantity without a firm commitment to purchase, allowing the client to confirm shipments before acceptance. This type often involves short lead times, requires suppliers to maintain minimum stock levels, and may have fixed or adjustable pricing.
Advantages of Open Orders:
- Reduced inventory holding costs
- Higher material turnover
- Potential for lower purchase prices due to volume
- Lower administrative costs due to reduced paperwork
Based on Material Destination:
- Extraordinary Order: For materials required urgently or for a specific, non-routine purpose.
- Replacement Order: Initiated by the purchasing department to replenish stock, typically triggered when inventory levels fall below a predetermined minimum.
- Service Order: For requesting a service or specific work, where required materials may be supplied by either the contractor or the client.
- Usual Order: The most common type, used to request items needed for immediate use or replenishment, regardless of the ultimate purpose (replacement or consumption).
3. The Order Form
Essential information to include in an order form:
- Buyer Details: Name, address, VAT number, and country (if international).
- Order Number: Unique identifier for tracking.
- Order Date and References: Date of issuance and any relevant references.
- Vendor Details: Name, address, VAT number, and contact information.
- Item Details: Product name, description, quantity, unit price, and potentially partial and total amounts.
- Terms and Conditions: Discounts, payment terms, and other relevant agreements.
3.1 Order Book
Maintaining an order book helps track and manage orders effectively. Typical information included:
- Order Number
- Order Date
- Order Amount
- Vendor Code or CIF
- Delivery Date
- Delivery Location
- Received Status
- Air Waybill Number (if applicable)
- Comments
4. The Delivery Note (Slip)
A delivery note is a document accompanying the merchandise, serving as proof of delivery and a reference for invoicing. Multiple copies are typically generated for distribution to various departments:
- Customer Copy: Signed and returned by the customer as acknowledgment of receipt.
- Warehouse Copy: Retained for inventory control and justification of goods removal.
- Sales Department Copy: Used for sales tracking and reconciliation.