How to understand your purchase invoice.
Once you have received a purchase invoice from one of your suppliers you will need to check all of the details to ensure that there have not been any mistakes. It is always easier to correct an invoice prior to making payment on it and prior to it becoming due. It could be any purchase receipt, for services or goods and can also include utility bills and rent.
Payment of a purchase invoice
It is advisable to always pay your supplier invoices on time. If you are having a problem with cash-flow then you should make contact with the supplier and suggest a short-term payment plan. If you are never available or willing to take supplier phone calls they will be more likely to take further action and might also try and claim the money for their time in chasing the debt as well as the original debt amount through the courts. This is obviously something that you will want to avoid.
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If you need to delay a payment then you should first ask to do so with the supplier. If they are unable to do that, you could also write a cheque with an advanced date on it, such as a week from that day or a month from that day. Once you have a dedicated accounting system, it will create the ability for you you to keep better control over your business finances and suppliers would be able to know when they would be paid, so the likelihood is that they will not call you looking for payment until after that date
Try and maintain a good relationship with all of your suppliers: if you do not pay when you say you will and you can’t be relied on to give accurate information to the supplier, you will quickly lose your footing with that supplier and the possibility of ordering with them at all.
You will normally be supplied with a monthly statement of account from suppliers. It is always a good idea to make sure that you have received all the purchase invoices and also to see if all payments that you have made were received and credited to your account. If you find any discrepancies you can contact them to resolve the problem prior to making the next payment.
If you have returned goods or agreed to a credit with your supplier it is worth making sure that the credit note was issued prior to paying the purchase invoice. It is normally a lot easier to get this sorted out before you make payment.
How to record a purchase invoice in the accounts
If you are using an accounting software system you will be able to enter the purchase invoice details to the supplier account. Post as much detail as you can: this will help if you need to trace an invoice, or if you need to find out what an individual product costs when you reorder.
If you use a manual system, you should keep a list of all your supplier invoices received. Your business will need to record the following: Invoice Date, Net Amount, VAT Supplier Name, and Gross Amount. You might need a short description which will help you if you need to trace an invoice later on. You can total all of the purchases at any stage you want.
Filing a purchase invoice
To make the process of finding an invoice easier to, the best way to file supplier invoices is in alphabetical order and then again by invoice number order. If you file the newest invoices on the top, this will ensure that they are the easiest to find. You might also prefer to have two files for purchase invoices: one file for the invoices that have been paid and another for invoices that still need to be paid. At any rate, HMRC imposes a legal requirement on all businesses to keep all financial paperwork for a minimum of six years from the year end date.
Last modified: 8th March 2018