- Meaning of payment
A payment is the transfer of an item of value from one party (such as a person or company) to another in exchange for the provision of goods, services or both, or to fulfill a legal obligation.
The simplest and oldest form of payment is barter, the exchange of one good or service for another. In the modern world, common means of payment by an individual include money, check, debit, credit, or bank transfer, and in trade such payments are frequently preceded by an invoice or result in a receipt. However, there are no arbitrary limits on the form a payment can take and thus in complex transactions between businesses, payments may take the form of stock or other more complicated arrangements.
In law, the payer is the party making a payment while the payee is the party receiving the payment.
- Factors to consinder before making payment
- Payment avenues available
- Approval by P.O
- Funds availability
- Terms of contract
- Conformances to order fulfilment
- Approvals done .
- Documents used in payment process
- Local Purchase order:
A local purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a PO to a supplier constitutes a legal offer to buy products or services. Acceptance of a PO by a seller usually forms a one-off contract between the buyer and seller, so no contract exists until the PO is accepted.
Reasons why companies use LPOs.
- They allow buyers to clearly and explicitly communicate their intentions to sellers
- Protect the seller in the event of a buyer’s refusal to pay for goods or services.
- Sets out in writing the items ordered
- Sets out the prices of the items ordered
- Sets out the manner of delivery
- Shows the terms of payment e.g. by cheque or cash
- Evidences the person who signed it and therefore this shows the person to take responsibility for it
- Allows the receiving department something to check against when the goods arrive
- Allows the paying department something to check against before making payment
- Goods receipt note (GRN):
This is a document used to record the inward entry of any goods received at the premises of the organization. The document normally consist of the details of Quantity Received, Quantity Rejected and Quantity Accepted, Supplier name and Purchase order number. The practice of preparing GRNs is important as it promotes proper inventory control and restricts the unwanted, unauthorized entry of goods in the organization. The GRN preparation is a part of effective Inventory Control Management.
- Advice note:
This is a note sent to a customer (Buyer) by a supplier of goods to advise him that an order has been fulfilled. The advice note may either accompany the goods or be sent separately. Also an advice note notifies the buyer that goods have been dispatched or are ready for collection. Copies of the advice note may be sent to relevant departments e.g. purchasing and stores
A non negotiable commercial instrument issued by a seller to a buyer. It identifies both the trading parties and lists, describes, and quantifies the items sold, shows the date of shipment and mode of transport, prices and discounts (if any), and delivery and payment terms.
- Inspection certificate
When shipping high-value products or when you are dealing with a very conscientious customer, an inspection certificate might be requested. An inspection certificate provides proof that what you are shipping is, in fact, what the customer ordered, and is also of good quality. If a customer requests this document, agree to it — but see that they cover the administrative and inspection fee. Also, ask them to recommend an independent inspection agency to perform the review at your end. An inspection certificate can be furnished directly to a buyer, a buyer’s government or direct to a buyer’s bank. In the case of presenting to a buyer’s bank, that is precipitated by the request of a Letter of Credit payment transaction that spells out specifically an inspection certificate is required in order to fulfill payment obligations.
- Packing note
A packing list is a document that includes details about the contents of a package. The packing list is intended to let transport agencies, government authorities, and customers know the contents of the package. These details help each of these parties handle the package accordingly.
Contents of a packing list
A packing list is expresses the contents of a package, along with details about the quantity, description, and weight of these contents. Content pricing is not included.
A packing list is created by the seller and sent to where the goods are located in order to have an accurate tally of the sent goods. Once the goods have been tallied and packed, the list is sent along with them to their destination.
- Methods of payment
- Cash on order
cash with order (CWO) : Definition Add to Flash cards Save to Favorites terms of sale showing the payment has to be made in cash when the order is placed.
- Cash on delivery:
Cash on delivery (COD), sometimes called collect on delivery, is the sale of goods by mail order where payment is made on delivery rather than in advance. If the goods are not paid for, they are returned to the retailer. Originally, the term applied only to payment by cash but as other forms of payment have become more common, the word “cash” has sometimes been replaced with the word “collect” to include transactions by checks, credit cards or debit cards.
Advantages and disadvantages for retailers
The advantages of COD for online or mail order retailers are:
- The customer does not need to own a credit card to purchase
- Impulse purchases may increase as payment is not due at the time of ordering
- The credibility of retailers may be increased because the consumer only has to pay when the item is delivered
The principal disadvantage for retailers is that many more orders will be returned as buyers are less committed to the purchase than if they had paid in advance.
- Credit Cards
- Instalment method
- Telegraphic money orders
- Money orders
- Travellers cheques
- A TM
- M-pesa /ZAP
- SWIFT TRANSFER/TT/RTGS