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Invoice Handling

Invoices have to be looked at least from two sides. In the following article process-steps arround the invoice are regarded. As basis for the explanation we take a simple example: company A has the need of certain products and services. Company B offers the goods and services required. To understand the term invoice and invoice handling in Business to Business (B2B) there are important keywords as purchase, delivery, tendering account, invoice verification and at least the payment.

Process of Ordering

The department from company A with the need gives the instruction to its procurement department to purchase the products and services e.g. with the help of an information system as SAP or others. In the procurement department the first step is the check according to the procurement process, if there are preferred suppliers with framework contracts that could deliver this products and services to the conditions required. If not and depending on the size and volume of the need, a tender process according to the legal framework gets started. At the end of the tender process there is a at least one framework contract. According to this framework contract the order on call is realized with the purchase order. The order clearly explains, which products and services are needed, to which extend and to which conditions they should be delivered, as well as the agreement on payment terms.

Tendering of Account

After delivery of the required goods and/or services to company A and e.g the reception of the delivery note, company B will draw up the Invoice 1) to company A in order to address the demand to the recipient.

According to Farlex Financial Dictionary an invoice is a statement given by a seller to a buyer itemizing the sale and demanding payment. An invoice may be for the sale of a good or a service. The invoice usually states the names of the counterparties and the goods and/or services purchased, and adds any applicable sales tax or VAT. It may also include the terms of sale, especially if it is a credit sale. 2)

From the point of view of the seller (company B), a sales invoice is generated. From the point of view of the buyer (company A) a purchase invoice is received. 3)

Invoices can be paper-based or in electronic media. The electronic format is called e-invoicing or Web-invoicing. 4) Especially in e-commerce electronic invoices are transfered. EDI standards, as the UN-standard EDIFACT 5) for administration, commerce and transport is to be used.

Invoice Verification

After the delivery company A receives an invoice. This invoice is handled after the accounting process, which very often is supported by information systems as for example SAP. At the end of the process stands the payment, which is can be realized in multiple varying forms. In the following paragraph the process of handling an invoice is described exemplary without demand of being complete.

  1. the invoice gets scanned (transformation in electronic version)
  2. the invoice gets registered and a first check is realized by the accounting department, if the necessary information is included. If not, it gets to be sent back to the sender. If yes, it gets electronically transferred to the person, who gave the instruction to purchase (this is identified by the purchase number in the information system) or to a person named in the invoice
  3. the person giving the instruction to purchase or the named person in the invoice checks if the invoice contains the delivered goods and if the delivery was in the quality desired. If yes, the person gives the whole or partly confirmation of delivery. If not, the person will negotiate with the seller about the necessity to change the invoice, which then has to be sent corrected version.
  4. With the confirmation of delivery the accounting department has the permission to realize the money transfer according to the agreed payment conditions to the seller (company B).
  5. According to the legislator framework all this movements as e.g. of goods, taxes, money flow and change of stock get into consideration to the balance of the company.

Payment Forms

Different forms of payment are possible. The distinction lies between classical methods as credit cards, checks, cash and electronic payments. Within the electronic payment there are credit cards, electronic checks, EFT, smart cards, e-cash and via the Internet as well intermediates as PayPal and iTransact. 6)

References

1) http://financial-dictionary.thefreedictionary.com/Invoice, May 13, 2011.
2) Farlex Financial Dictionary. © 2009 Farlex, Inc. All Rights Reserved
http://financial-dictionary.thefreedictionary.com/Invoice, May 13, 2011.
3) http://encyclopedia.thefreedictionary.com/Invoice, May 13, 2011.
4) Schaeffer, Mary S.Accounts Payable, A Guide to Running an Efficient Department Second Edition. Hoboken, New Jersey: John Wiley & Sons, Inc. 2004. Print. p.20. May 15, 2011.
5) http://wirtschaftslexikon.gabler.de/Archiv/75440/edifact-v5.html, May 15, 2011.
6) Olschimke Michael. Information Systems Management, Steinbeis MBA. p.38.
http://wbt.steinbeismba.de/file.php/5/dokumente/Information_Systems_Management/Script_ISM_v2.pdf. April 12, 2011.

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invoice_handling.txt · Last modified: 2012/01/03 07:32 (external edit)