Cash transactions are fairly straightforward. The buyer orders goods or services and pays for them immediately at the time of receipt of goods or performance of the service. The seller delivers the goods or provides the service, and often gives the customer a receipt as evidence of payment.
You probably have been the buyer yourself in many cash transactions, such as the purchase of a newspaper or magazine from a local retailer, but let's look at a number of different cash transactions from the viewpoint of the seller.
Sales in a shop are 'over the counter'. The customer selects the goods required, takes them to a sales desk or check-out point, pays for them, and takes them away. The seller gives the customer a receipt, as evidence of the transaction and the payment. If the customer then wants to return the goods, because there is something wrong with them, the seller can ask to see the receipt, to confirm that the customer did actually buy the items recently in the shop. Sales are also recorded automatically by the seller's cash register, and at the end of the day, a till roll may be produced by the cash register, listing all the items sold through the check-out point during that day.
Another type of transaction involving a face-to-face verbal order occurs when the goods or services are not available immediately. Instead, the customer orders them for future receipt or delivery. In many cases, the customer may be asked to pay a deposit with the order, and make the rest of the payment ('pay the balance') when the goods or services are delivered or provided.
Suppose, for example, that you go to a car dealer to buy a new car. The salesperson will show you a demonstration model, and talk to you about all the optional extras you can buy with the car. The salesperson will then record the details of your order on a sales order form, which you will sign. This form will include the name and address of seller and purchaser together with the full details of the order and agreed costs. You will probably have to pay a deposit, which could be, say, 10% of the purchase price. The car dealer uses this order form to process your order, by asking the manufacturer to supply a car to your specification. You will be given a copy of the sales order form as evidence of your order, and as a receipt for your deposit. (Alternatively, you may be given a separate receipt for the deposit.) When the car is delivered to the car dealer, you will be issued with an invoice, stating the full purchase price and the deposit you have already paid, and asking you to pay the balance of the purchase price. When you have paid, you will go to the car showroom and receive a receipt for your payment, and then you can drive the car away.
Sometimes the extent of an order is not completely clear. For example, if your heating or air conditioning system breaks down you would call an engineer to fix the problem. Usually the engineer will examine the equipment and then provide you with a quotation. This will contain details of the work needed including a list of replacement parts and labour and an indication of the amount the repair will cost. Sometimes the quotation will be preceded with an estimate which may be provided verbally at the time the engineer calls. The quotation is a more formal document, which may be relied on by the prospective purchaser and which is provided in writing to confirm agreement of the estimate.
The procedures for taking orders by telephone can vary from organisation to organisation, but may be as follows.
Suppose that you want to buy a book and contact the seller by telephone with your order. The details of your order will be taken, and entered on a sales order form. A sales order form may be a paper document, but more likely to be entered into a computerised system which displays an order form on screen. Payment details will usually be taken at this time.
The sales order is then used to create a dispatch note, which is an instruction to the warehouse to send the book to the address you have given. A copy of the dispatch note will be attached to the package containing your book, and this copy is called a delivery note. When you receive the book, you will also receive the delivery note, as evidence that the item has been delivered to you. (Some businesses use two copies of a delivery note, which the customer is asked to sign. One copy is then retained by the supplier, as evidence that the customer has taken delivery of the goods.)
You will also be given a receipt, as documentary evidence that you have paid for the book. The receipt could either be a separate document, or included along with the delivery note.
A common example of a written order in a cash transaction is buying goods from a mail order or catalogue business, using an order form within the catalogue.
Suppose, for example, that you have a sales catalogue from Postal Fashions, a mail order firm that sells items of clothing. You might place an order for some shirts by filling in the form, indicating which shirts you want and how many, and signing it. This order form may be called a purchase order. You would send the form, together with your cheque payment or credit card details, to Postal Fashions. Postal Fashions would copy the order details on to a dispatch note. (In practice, order details are usually keyed into a computer system from the order form, and the computerised system then produces a dispatch note and delivery note automatically.) The shirts would then be posted to you with a delivery note, which will probably also include a statement that you have paid for the items in full. In other words, for this type of transaction, the delivery note also acts as a receipt.
Increasingly, customers are using the internet to make orders. A common way of selling on the internet is for a business to have a website that allows customers to select the goods or services they want to buy, by placing them in an electronic 'shopping basket'. Usually, the customer enters credit card or debit card details with the order, to pay for the purchased items. If the customer wants to purchase books. they enter their requirements on an electronic order form which may involve simply ticking a box or specifying the quantity they wish to purchase. They will then be taken through a secure buying system which results in a paid invoice and/or a receipt which can be printed out at the end of the transaction. A copy may also be emailed to the purchaser. The books are then despatched with a delivery note.
What do you think is the difference between a sales order form and a purchase order form?
For a suggested answer, see the Answers' section at the end of the book.
The cash transactions above are those you will recognise as taking place between individuals and businesses. Businesses may also buy from other businesses using cash, rather than bank, transactions. Purchases must be properly agreed and authorised within the purchasing business.
Internal cheque requisition forms may be completed by a junior member of staff to be authorised by more senior management. They contain details of proposed purchases, including: the nature of the goods, their cost and the chosen supplier. The cheque requisition form is then sent to the cashier (or other authorised person having control of the business cheque book). A cheque is drawn up and provided for the purchase
Many businesses maintain a system whereby a cheque requisition form is required for any abnormal expense, any item of capital expense and any payment request not supported by a relevant invoice.
Given below is an example cheque requisition form for payment of balance on the sales director's company credit card.
Please draw a cheque on the company's bank account as follows: