Upon receiving orders from customers (via telephone, fax, email, etc), the sales staff will prepare the sales quotations which are prepared based on the Pricing Strategy Policy which serves as a guideline on minimum sales gross margin requirement for the sales team to comply with during the quotation stage to customers.
All quotations raised and sent to customers are entered into the system regardless of whether sales orders are subsequently issued. Quotations are only valid for 7 days from the date of issue unless prior approval is obtained from either Sales Supervisor or General Manager. Noted that there are no reference numbers reflected on the quotations.
Purchase orders (“POs”) from customers should be requested as proof of order. When it is unlikely to obtain a copy of PO, the sales staff needs to forward a copy of Order Confirmation Form to the customers to acknowledge and confirm their orders.
Once the customers have agreed to the quoted price and confirmed their orders within the quotations validity date, the sales staff will check the credit limits of the non-cash term customers while for the cash term customers, the sales staff will proceed with the allocation of goods in the system. Please refer to section 2 below for credit control process.
Afterwards, the sales staff will convert the quotations in the system to sales order status.
The soft copy of Pick Notes (“PNs”) generated by the sales personnel will be sent to the Warehouse Department through the system. The Warehouse Department will print out 3 copies of the PN from the system. Note that the PNs are sequentially numbered by the system.
The warehouse personnel will pick the goods as indicated on the PN and acknowledge on it once completed. The goods are then sent to the outbound area whereby the export staff and the security guard will receive the goods (no checking is involved) and acknowledge on the PN. One copy will be retained by the Warehouse Department while the other copy will be forwarded to the sales staff.
Thereafter, the sales staff will print 3 copies of the Delivery Orders (“DOs”) in accordance to the following arrangement:
– 1st copy (with no pricing information) ? this will be signed and retained by the customer/ forwarder (overseas sales) upon receipt of goods.
– 2nd copy (with no pricing information) ? this will be signed by customers/ forwarder (overseas sales) to acknowledge the receipt of goods and subsequently filed by the Sales Department.
– 3rd copy (with pricing information) ? this will be retained by the Sales Department.
Note that the DOs are sequentially numbered by the system.
The sales staff will check that the accuracy of the prices indicated on the DO and sign on it. The 1st and 2nd copy will be handed over to the packing department at the outbound area to pack the goods while the last copy is retained by the sales staff. After the delivery (local sales) or collection of goods by forwarder (overseas sales) was made, the 2nd copy of DO is forwarded to Sales Department to issue the invoices.
For overseas sales, in order to ensure complete documentation, the sales staff needs to fill in the Customer Shipment Checklist (“CSC”) which helps to keep track of the dates in which each of the above processes is performed e.g. issuance of PO, DO and invoice as well as forwarder collection date.
2 copies of sales invoice will be generated by the Sales Department whereby the 1st copy will be forwarded to the customer and the second copy will be retained by the sales department to be filed together with the corresponding DO. Concurrently, the system will automatically deduct the inventory balance and recognize the cost of sales. Note that the invoice numbers start with IN i.e. INxxxxxxx and are sequentially generated by the system.
The sales department needs to perform the final check to ensure that the prices reflected on the quotation and DO are the same as the invoice.
Per discussion with Management, revenue and the corresponding cost of goods sold will only be recognised upon creation of invoices. While there will be time lag between the DO acknowledgement date and invoice issuance date, understood from Management that it will only be a few days lag (less than a week).
In mitigating the risk of sales being recorded in the wrong period, during month end closing, Accounting Department will generate a list of invoices being issued within the first 7-10 days of the subsequent month and liaise with the respective sales personnel to obtain the DO acknowledgment dates.
For those invoices with DO acknowledgement dates before month end, a manual journal voucher (“JV”) will be issued by Account staff to adjust the sales amount and the corresponding trade receivables. The JV will be forwarded to Finance Manager for review, approval and posting to the system. The journal entries are:
At the end of the following month, another JV will be passed to reverse the above as to reduce the sales relating to invoices issued during the month which pertain to delivery made in the prior month.
While adjustment to sales is performed monthly, adjustment to cost of sales and its corresponding inventory is only performed half yearly.