Session 2 - 04 Purchase Order Expense Claims Inovicing & Payment Schedule

Summary

This script delves into the intricacies of financial documentation, emphasizing the importance of tax invoices in Australia, the necessity of verifying Australian Business Numbers (ABN), and the implications of non-compliance. It also covers various financial terms such as purchase orders, expense claims, and remittance advices, providing insights into best practices for managing client finances and the significance of attention to detail in accounting processes.

Takeaways

• 📜 A purchase bill is equivalent to a tax invoice in Australia and must explicitly state 'tax invoice' on it.
• 🔍 When paying suppliers, it's crucial to check their Australian Business Number (ABN) to ensure they are registered and not causing the payer to withhold 47% tax.
• 🤔 The importance of communication with suppliers and business owners regarding ABN issues and the potential withholding of tax is highlighted.
• 💼 The role of a good accountant involves attention to detail, such as following up on old credit notes to ensure funds are not left unclaimed.
• 🔄 The explanation of different types of invoices, such as sales invoices and credit notes, and their functions in business transactions.
• 📋 The use of debit notes, often mistakenly called credit notes, to offset invoices sent to clients.
• 🛒 The process of using purchase orders in a formal purchasing system and how they relate to invoices and payments.
• 💼 The procedure of handling expense claims, emphasizing the need for proper documentation and reimbursement.
• 🗓️ The significance of invoicing in managing a business's cash flow and the potential time investment involved in this process.
• 📝 The role of remittance advices in clarifying which invoices have been paid by a company to its suppliers.
• 🔄 The importance of bank feeds for automating the import of bank transactions into accounting systems, but also the necessity of verifying them to prevent discrepancies.

Q & A

What is the difference between a purchase bill and a tax invoice in Australia?

A purchase bill and a tax invoice essentially refer to the same document, which is a bill for goods or services that a business purchases. However, in Australia, a tax invoice must specifically state 'tax invoice' on it and meet certain requirements to be used for claiming GST credits.

Why is it important to check a supplier's Australian Business Number (ABN)?

Checking a supplier's ABN is crucial because if a supplier does not have a valid ABN or if it's expired, the business paying them is legally required to withhold 47% tax. This ensures that the supplier is part of the taxation system and that the government can track the revenue.

What should a business do if a supplier does not have an ABN?

If a supplier does not have an ABN, the business should contact the supplier and request that they register for an ABN and provide the number. If the supplier does not comply, the business may have to withhold 47% tax as per legal requirements.

What is the purpose of a receipt in business transactions?

A receipt serves as proof of payment for goods or services. It is typically issued after a transaction has been completed and payment has been made, indicating that the goods or services have been paid for.

Can you explain the concept of a sales invoice in business?

A sales invoice is a document issued by a seller to a buyer, detailing the products or services provided, their quantities, agreed prices, and the total amount due. It is sent to the customer with the expectation of payment.

What is a credit note and how is it used in business?

A credit note is a document issued by a seller to a buyer to indicate a reduction in the amount owed due to a return, discount, or other adjustments. It effectively reduces the amount to be paid on an invoice by the specified credit amount.

Why is it important to regularly review and clear old credit notes?

Regularly reviewing and clearing old credit notes is important to ensure accurate financial records and to prevent the loss of potential funds. Old credit notes may represent money that could be reclaimed or applied to reduce outstanding debts.

What is a debit note and how does it differ from a credit note?

A debit note is a document used to request an additional payment from a customer when there is an increase in the amount due, such as for additional goods or services provided. It is similar to a credit note but is used for increasing payments rather than decreasing them. However, in common practice, the term 'credit note' is often used to refer to both types of adjustments.

What is a purchase order and how does it fit into the purchasing process?

A purchase order is a document that formalizes the purchase of goods or services from a supplier. It includes details such as the items ordered, quantities, agreed prices, and delivery terms. It is used in a structured purchasing system where approval is obtained before the order is placed with the supplier.

What is an expense claim and how does it relate to reimbursement?

An expense claim is a request made by an employee to the employer for reimbursement of expenses incurred on behalf of the company. The employee must provide receipts and documentation to prove the expenses were legitimate business costs, after which the company reimburses the employee.

Why is it necessary to send a remittance advice after paying a supplier?

A remittance advice is necessary to inform the supplier which invoices have been paid, ensuring that they can correctly allocate the payment to the outstanding bills. This helps prevent discrepancies and confusion in the supplier's accounting records.

What is the significance of bank feeds in accounting systems?

Bank feeds automate the process of importing bank transactions into an accounting system, eliminating the need for manual entry. They help maintain accurate and up-to-date records of all financial transactions, but it's still important to verify the bank statement balance with the system to ensure all transactions have been correctly imported.