We’ve had a request for a follow up to a previous blog of accounting definitions, this time requesting some more basic terms to help people who don’t work in a finance role but need to understand the terms, such as when needing to order from suppliers, etc. Think we’ve missed one? Let us know!
Sent from a supplier to a potential customer, it will detail what is going to be supplied (goods & services) and what rate. A quote is usually a fixed price, whereas an estimate is more of a guide price, although quotes often have conditions on them for increasing the price too.
A purchase order, often called a PO, is used to officially order goods and/or services from one supplier to another. For example, ABC Ltd has quoted to do some work for XYZ Ltd, XYZ Ltd like the quote, tell them the want to go ahead at which point they might issue a Purchase Order to officiate the order.
Not all companies use PO’s, but they’re useful when the person ordering isn’t the person entering the invoice, as it gives them a way of checking that the invoice is as expected and help with projecting costs on longer jobs and keeping track of what’s been ordered by who.
The official bill from the supplier to the customer. Issued at a time advised to the customer, such as on completion of work, at the start with an amount due before work commences, monthly in arrears, etc, it will detail what the customer owes and what for, the date the payment has to be made by and how. Will also detail any VAT included.
The same as an invoice but issued before any goods or services are supplied, requiring payment before they will be released. This is often raised as a way of enabling a payment to be made (such as from an accounts department) in order to obtain goods and/or services. An invoice will usually then be issued after payment is received, often marked paid.
Either a paper or email confirmation of goods and/or services received, the amount paid and any tax (usually VAT) paid. Receipts are used as proof of VAT being claimed from HMRC (as are invoices you’ve received) so must contain the VAT number as well as showing the VAT amount if you are claiming the VAT from HMRC.