Week three: Business Systems

Documents

 

  1. Cheque Butt – Shows details about a cheque written including date, person or business being paid, reason for payment and amount
  1. Credit Note – Used when a customer has returned goods purchased or been overcharged on their original purchase
  1. Internal Source Document – Generated within the business and retained within the business
  1. Invoice – Details what the customer has purchased including date, description and quantity
  1. Purchase Order – Purchaser issues this to a supplier listing what goods they want to order
  1. Receipt – May be prepared when money is received by the business
  1. Remittance Advice – Shows details of who is making a payment and what they are making the payment for
  1. Source Document – Provides the evidence that a transaction has actually taken place
  1. External Source Document – Generated outside the business or created by the business to send out
  1. Statement – Summary of invoices and credit notes issued to the customer and payments received from the customer
  1. Tax Invoice – An invoice which meets the extra requirements when a business is registered for GST

Terms

  1. Accounts Payable – also known as Creditors
  2. Accounts Payable – amounts our business owes someone else
  3. Accounts Receivable – also known as debtors
  4. Accounts Receivable – amounts someone owes our business
  5. Assets – resources controlled by our business as a result of past events
  6. Bad Debt – an amount owed to us which is uncollectable and is written off
  7. Non-Current Assets – also known as Fixed Assets
  8. Non-Current Assets – are assets of permanent nature required for the normal conduct of a business and which aren’t intended for resale as part of the business operations
  9. GST – Goods and Services Tax of 15%
  10. Inventory – also known as Stock
  11. Inventory – raw materials, work in progress and goods held for resale by the business
  12. Liabilities – a loan or any other amount of money owed to someone else
  13. Mark up – the amount added to the cost of the goods to make a profit for the business
  14. Net Profit – the difference between the income and expenses of a business
  15. Net Profit – also known as net income or net surplus
  16. Partnership – business entity owned by more than 1 person
  17. Shareholder – someone who owns shares in a company
  18. Sole Trader – business owned by 1 person

Document Flow

The Business A wants to purchase goods from Business B
Business A prepares a purchase order which it sends to Business B.
Business B receives the Purchase order from Business A, locates the goods and packages them up to send to Business B.  Business B also prepares an Invoice which they may use as a packing slip as well.  The Invoice could be sent with the goods or sent at a later date to Business A.
When Business A receives the Invoice and goods they will compare what has been sent is what they ordered by comparing them to the Purchase order copy they kept.
When Business A confirms they have received what they ordered, they will pay the Invoice  using a Cheque or paying online.  They may also send back a Remittance order so business B knows who the payment comes from.
When business B receives the payment from Business A they may issue a Receipt
Business B will bank any Cheques/payments they have received into their bank account.
If Business A has not paid by the end of the month, Business B may send a Statement which shows amount still owing by Business A.
Sometimes Business B may issue Credit note if the items sent to Business A are damaged or missing.

 

Links for IRD

IT professional understanding business terminology and document flow

 

What I think

I think it’s very imported for a IT professional to understand business terminology. When you start to working for a IT company and especially if you start your own company, you will bump into paper work about business that you must read and write. It could be tax, purchase order or about your inventory.  With knowledge you will be more attractive to companies, they wont be afraid that you will do any misstake because you hadn’t the right qualification. instead, they will hire you for your skills in IT and business.

 

Why you should have knowledge

With knowledge in business terminology and document flow you will have understanding what would happen when you do payment or if you want to earn money from customers. When you do payment you know what to pay, you know how much tax you should pay and probably you can see if something is wrong or not. You know where to look after informations. You know which paper,when and where you send them.

 

What could happen if you do not
have any knowledge

Without any knowledge you can do a lot of misstakes, you maybe sending wrong invoice to wrong customer or you miss to add tax on the price. So for example if you miss to charge for the tax, then you must take money from the company to pay the government the fee for tax and the boss will not be happy about it. Maybe you forgot to give tax to the government, then you will be owe the state money..
When you want to give a invoice to the customer, you want to give the right deb for the work and tax. You don’t want to lose money and you don’t want to take too much so you will be owe money to customer, they won’t come back after that..
You maybe buying components to your company to fill up your inventory but buying to much and pay to much. There’s a lot of different misstake you can do without knowledge.
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