Thursday, 14 August 2014

Contingency Approach to Management

This is another modern approach that has attempted to integrate finding of other perspectives. They believe that it is impossible to select one way of managing that works best in all situations. Their approach is to identify the conditions of a task, managerial job and person as parts of a complete management situation and attempt to integrate them all into a solution which is most appropriate for specific circumstance.

The manager has to try systematically to identify which technique or approach will, in a particular circumstance or context, best contribute to the attainment of the desired goals.

The contingency approach may consider, for policy reasons, that an incentive scheme was not relevant. Also the expense of a job enrichment scheme may rule this out. The complexity of each situation should be noted and decisions made in each individual circumstances.  

It should be borne in mind that the contingency approach is not really new, that emphasized the importance of choosing the general type of management best suited to a particular case.

The contingency approach seeks to apply to real life situations ideas drawn from several of management thought. Different problems and situations require different approaches and no one approach is universally applicable. Manager must seek to identify the approach that will serve them best in any given situation, so they can achieve their goal.

It is important to note that the contingency approach stresses the need for managers to examine the relationship between the internal and external environment of an organization.

The system approach to management emphasizes that relationships between various parts of an organization are interlocked. The contingency approach has emphasized this idea by focusing on the nature of such relationships.

Criticisms of the contingency approach are that it has little theoretical foundation and is basically intuitive. This can be countered by noting that the contingency approach examines each situation to find out its unique attributes before management makes a decision. Earlier approaches tended to consider universal principles which were not always applicable to specific situations.

Managers today are advised to analyze a situation and find appropriate combination of management techniques to meet the needs of the situation.

Tuesday, 12 August 2014

Systems approach in Management

Many activities in organization were treated in an essentially descriptive. The approaches, scientific, administrative management, behavioral are useful in different circumstances, but it is difficult to be sure which one is right in a given situation. In view of this, it is considered that the newer systems and contingency approaches may provide a more complete integrated approach to the problems of management.

Thinking about management with knowledge of the systems approach can help to postulate conceptually the interrelationship of apparently separate and even contradictory ideas underlying management theory for the first time.

A system is an organized combination of parts which form a complex entity, with interrelationships or interactions between the parts and between the system and environment.

A management system encourages one to consider the cutting across of traditional boundaries of responsibility between departments in order to appreciate the objectives of the whole organization. Distinct demarcation lines between purchasing, manufacturing, engineering, marketing, etc., may becomes less distinct and a revision of organization may be needed. This is essential in viewing the management process as a system.

The systems approach stresses the need for more understanding in the development of sophisticated problem-solving techniques, e.g. simulation, operations research and computerized information systems. All these aim to improve the control mechanisms of organizational systems so that they can plan for, and react more effectively to changes in the environment.

The systems approach attempts to give managers a way of looking at organizations as a complete whole. It implies that activities in any part of the organization will affect the activities of every other part. The adoption of a system approach will involved a marked change in organization, hence the vital need to prepare the organization well in advance for the need to accept change.

Whatever classification is given to managerial activities and responsibilities, they becoming more dynamic and complex because a greater rate of change and problems of co-ordination and integration as more jobs become specialized.

Traditional managerial theory and behavioral science have provided guidelines to cope with uncertainty and change, but the approaches are too fragmented. It is here that a systems approach can help.

General systems theory provided valuable insights into the structure and process of management. The systems approach recognized variety and offers a way of interrelating differences by reconciling them within the whole. This is an approach which emphasizes theory and conformity.

Monday, 14 July 2014

Expansion of Management Knowledge

Management is an applied technique and a closely to many allied fields e.g. economics. Disciplines devoted to studying people, e.g. psychology, sociology and political science, have grown and generated an expansion of management knowledge.

The development of management thought can, for convenience, by considered to comprise four main periods – early influence, the scientific management movement, the human relations movement, and modern influences, e.g. the revisionist movement.

Early influences

Ancient records in China and Greece indicate the importance of organization and administration, but do not much insight into the principles of management. Outstanding scholars have referred to management activities in the running of city states and empires.

The Administration of the Roman Empire was a complex job. The Romans effectively used many basic management ideas, e.g. scalar principles and delegation of authority.

Scientific management

In the years after 1900, conventional management practices were found to be inadequate to meet demands from the changing economic, social and technological environment. A few pioneers examined causes of inefficiency and experimented to try to find more efficient methods and procedures for control. From these basic experiments a system of management thought developed which come to be known as scientific management.

The method was to investigate every operating problem and try to determine the “best way” to solve the problems, using scientific methods of research. The concept involved a way of thinking about management.

Administrative management

The role of administrative management and concluded that all activities that occur in business organization could be divided in to six groups, i.e.:
  • Technical (production, manufacturing)
  • Commercial (buying, selling, exchange)
  • Financial (obtaining and using capital)
  • Security (protection of property and persons)
  • Accounting (balance sheet, stocktaking, statistic, costing)
  • Managerial (planning, organizing, commanding, co-coordinating, controlling)
 The six groups of activities above are interdependent and that it is the role of management to ensure all six activities work smoothly to achieve the goals of an enterprise.

Human relations movement and behavioural science

Industrial psychology emerged a specific field about 1913, it was concerned with problems of fatigue and monotony and efficiency in work, as well as in the design of equipment, lighting and other working conditions. It later dealt with problems of selecting and training employees and developed techniques of psychological testing and measurement. Industrial psychology emphasized the study of large and small groups in industry. The basis of the human relations movement was the integration of various disciplines, i.e. industrial psychology and sociology, applied anthropology and social psychology, and was concerned with the human problems which management encountered.

Friday, 11 July 2014

Management to be a Profession ?

In recent years there has been further consideration as to whether management can be regarded as a profession. The conflicting arguments can be considered only if a profession is defined. The following main points seem relevant:
  • There must exist a body of principles, skills and techniques and specialized knowledge;
  • There must be formal methods of acquiring training and experience;
  • An organization should be established which forms ethical codes for the guidance and conduct of members.
 If the above standards are considered, the management cannot really be a called a profession. There are no licenses for managers, nor is there an accepted code of ethics. Management is a practice, rather than a science or profession.

Economic performance and achievement are the proper aims of management and that a manager’s primary responsibility is to manage a business. A manager should not, therefore, devote time to objectives such as professionalism which lie out-side the enterprise.

The solution may lie in a balanced approach. At present there are trends towards professionalism, seem in the development of skills and techniques, more formal training facilities and the greater use of management consultants and specialized associations.

Managers have to balance their obligations to the undertaking which employs them with the community at large, with other employees, suppliers, consumers, and their own conscience.

Because of the growing professionalism of managers there is a need for such a code of conduct as brief below:
  • To act loyal and honestly in carrying out the policy of the organization and not undermine its image or reputation;
  • To accept responsibility for their work and that of their subordinates;
  • Not to abuse their authority for personal gain;
  • Not to injure or attempt to injure the professional reputation, prospects or business of others;
  • Always to comply strictly with the law and operate within the spirit of the law.
Other points refer to dealing honestly with the public, promoting the increase in competence and the standing of the profession of management, and recognizing that the organization has obligation to owners, employees, suppliers, customers, users, and the general public.

Guides to good practice include:
  • Establishing objectives for themselves and their subordinates which do not conflict with the organization’s overall objectives;
  • Respecting confidentially of information and not using it for personal gain;
  • Making full disclosure of a personal interest to their employer.
Other points refer to helping and training subordinates, ensuring their safety and well –being, honouring contracts to customers and suppler, ensuring correct information is produced, not tolerating any corrupt practices, and finally to setting up a disciplinary structure to implement the code.

Wednesday, 9 July 2014

Administration being part of Management

Administration is sometimes used to refer to the activities of the higher level of the management group who determine major aims and policies. This can be called the broader use of the term which is often used in government departments. It is also used in the narrower sense, of controlling the day-to-day running of the enterprise.

An administrator can also be a manager, this occurs when the administrator is concerned with implementing policy in dealings with employees to whom responsibilities have been delegated.

Defines of administration is the part of the management process concerned with the institution and carrying out of procedures by which the programmed is laid down and communicated, and the progress of activities is regulated and checked against targets and plans.

Management has even more meanings than administration. Management can mean:
  • A process by which scarce resources are combined to achieve given ends. This describes and activity which can be better described by the word managing;
  • The management referring to those people carrying out the activity. This should really be the managers;
  • The body of knowledge about the activity of managing, regarded here as a special field of study, i.e. a profession

Of these three, the first is preferable, management referring to the process of management.

A useful approach is to consider management to be a process whereby a suitable environment is created for effort to be organized to accomplish desired goals.

Management can define as:
A social process entailing responsibility for the effective and economical planning and regulation of the operations of an enterprise, in fulfilment of a given purpose or tasks, such responsibility involving:
  • Judgement and decision in determining plans, and the development of data procedures to assist control of performance and progress against plans; and
  • The guidance, integration, motivation and supervision of the personnel composing the enterprise and carrying out its operations.
It can be seen from the above that the process as a whole is called management – administration being part of it.

The term top management usually refers to management above departmental level and is loosely applied to directors.

The word executive is correctly used when referring to a person who carried out policy. The phrase top executive is used for people of a high status, who is fact do no executive work at all, as they spend their time formulating policy. They are of course responsible for executive action done under their jurisdiction. Where words are associated with status rather than function, precision is impossible.

The concept of Management

There have been many attempts to describe the contents of the “job” of management. It has been considered to be a separate activity from the technical functions of production, marketing and finance. Various economists separated it from other factors of production (land, labour and capital). The other economists also agreed with the idea that management was a separate entity, being concerned with innovation as well as administration.

In recent years, management deals with a number of variable that are dependent upon each other. These variables will surely increase as companies grow more complex and it will then become more difficult to trace the side-effect of a change in dealing with a specific are of management responsibility.

There are many problems to be solved. Some people try to solve them by considering changes in the structure of organizations and the locations of authority and responsibility. Others hope to do it by improving the quality of decisions by new technological ideas and the use of modern methods of data processing. Yet another group expects to solve the same problem by concentrating on human relations

The vital point to be considered is that the structural, technological and human aspects cannot be separated as they all interact. For example, if a firm changes from a functional to a product grouping, problems of interpersonal relations occur. This may in turn affect the techniques of control (i.e. new financial systems may be needed). A knowledge of the above fact should enable a manager to understand that it may not be easy to find a simple answer to a problem but, by acknowledging this fact and using available knowledge wisely, answers can be much more accurate and effective.

The development of any science needs a conceptual framework of theory and principle. Principles of management have existed for a long time, but an acceptable framework to encompass them was needed.  A management principle distils and organizes knowledge that has been built up through experience and analysis. Management is far from being an exact science at present but, by understanding and applying accepted principles, the quality of management will never become wholly an exact science as personal judgment will always be needed to supplement available knowledge, therefore, as practice, management will always be an art.

Thursday, 3 July 2014

Characteristics of an effective teamwork

An effective team has clear goals and members who are committed to achieving these goals. In order to accomplish this, members should:
  • Enjoy open and honest communication (between members and with the leader)
  • Participate in goal setting
  • Contribute their skills and expertise
  • Deal constructively with differing point of view within the team
  • Be able to take on the role of another team member when required

Quality Teamwork

Organizations require quality effort from their teams. Teams can contribute much to the outcomes of the organization if they:
  • Use everybody within the group
  • Pay attention to data collection and analysis
  • Document process as a form of control
  • Focus on the needs of the customers and clients
  • Implement good communication processes

With these techniques in place, the result can be quite outstanding.

Team Leaders

Team leader have a particular role to fill. In the beginning their role is to set parameters and motivate members. As the team begins to function effectively, the role will change and the leader will become a facilitator.

Some suggestions for a good team leader are to:
  • Discuss matters concerning the work with all team members-keep them up-to-date
  • Respect the contributions made by members
  • Make sure members understand what is expected of them
  • Listen to all points of view
  • Build self-esteem
  • Motivate members towards attaining the team’s goals
  • Provide training and support in area which would assist member’s performance
  • Show appreciation for the contribution made by members


Delegating is a valuable time management tool. It involved work into separate tasks and allocating the responsibility for completing those tasks to team members or other staff members. Staffs who accept the tasks need to have the necessary time available for complete them, as well as expertise, skills and an interest in the project.

The constraints of time and the need to use the expertise of others are two reasons for delegating. Staffs stand to gain valuable experience. The team leader is available for consultation, but is also released to concentrate on other work. The person delegating the tasks should give feedback on how well the work was done.

A record should be kept of the work that is delegated and a follow-up system should be implemented to check on the progress.


Teams are not exempt from conflict situations. Members can express opinions and exhibit behaviours that are not always in line with the group’s ideas.

Conflict may be either destructive or constructive. The openness and assertiveness of communication will influence the satisfactory resolution of any disagreement.

Tuesday, 1 July 2014

Quality Formation Teamwork

There are several stages in team formation. A team leader needs to understand for cycles or phase of team formation so that appropriate support and encouragement are given.

This is the phase when the team first comes together to perform the set tasks. Members will learn:
  • How to relate to each other
  • To overcome fear, misgivings and apprehension
  • To appreciate the strengths of the team leader
  • What their function will be within the team
This is the phase when differences are sorted out and adjustments are made. Productivity may decline or be stalemated until the team members accept individual differences. The team members need to work harmoniously with the leader and know what is expected of them in their particular role.

The leader should discuss issues with members so that principles for working towards common goals are established.

In this phase, the team’s work begins to settle and members learn to appreciate the roles played by others, and also learn what their individual contribution should be.

By now, the leader should be developing trust in the team members who are starting to assume responsibility for working through the assigned tasks.

By the performing phase, teams are starting to see the result of their efforts. The balance within the team is more finely-turned and the leader’s role will change to one of delegation as members take on more decision making.

When a member leaves or a new member joins the team, progress will be disrupted. The team will revert to an earlier phase until it adjusts to the change in relationships and perhaps also to change in roles.

Industry is now placing more emphasis on the work carried out by teams. A popular phrase is “continuous improvement”. This means reviewing the current systems and assessing, in hindsight, whether they worked effectively or can be improved. The results are evaluated so that in future it is known what worked for particular team and what was not effective in achieving the desired outcomes.

Experience and knowledge gained through teamwork will make employees more valuable to the organization.

Team members should become enthusiastic and committed to developing strategies for reaching the goals set.

Some strategies are to:
  • Get the work done-understand what is required and follow through on what you have promised to do
  • Find ways of making and documenting improvement-look for  better work practices and ways of reducing wasted effort and materials
  • Share your ideas and ensure that quality processes are followed-tell other team members of improved methods you have developed what you have learned may enable cost savings to be made by the team and the organization.

Friday, 27 June 2014

Teamwork Member Participation

Team goals and tasks required

Through teamwork, you become a contributor to the setting of the organization’s goals. Goals are the “big picture”. When they are broken down into manageable portions, they become tasks. Tasks must be measurable-they must be quantifiable and time-limited.

Goals should be clearly set and attainable. If team members contribute to the goal setting process they will have a vested interest in the goal being reached. They will then be more motivated and committed to achieving those goals. Each team member needs to fully understand the role he or she has to play and the nature of the tasks for which he or she will be responsible.

A goal is a target based on the results you want to achieve.

Team Cooperation to complete goals and tasks

A good team includes in its planning an agreement to cooperate with other members, so that the organization’s goals and objectives are met. By doing this it also draws on the strengths of its membership.

Through communication networks and sharing of information and problems, support is provided to members as that task is completed within given timelines.

Group dynamics

Group dynamics is a term used to describe the energy of a group or team working and interacting to meet a common goal. Group dynamics has a marked effect on both the quality and quantity of a team’s output.

Members benefit from the expertise of one another and gather strength and focus. A spirit of cooperation and respect becomes evident. The combination of personalities encourages team members to reach their potential.


The efficiency and productivity of a team are influenced by the way is which members communicate with each other. Members should speak and listen to individuals as well as the leader. Nobody should be left out.

Other factors which influence the effectiveness of communication are good listening skills and the ability to use and read body language. Body language messages may be conveyed by certain movements of our eyes, head, face, arms, hands, shoulders, or even they way we sit or stand.


The work environment may give team members an opportunity to:
  • Show support, encouragement, trust and understanding
  • Express their opinions
  • Contribute to the team’s goals
 Or give them feeling of being:
  • Restrained, punished or threatened

Thursday, 26 June 2014

Good time management skills

Responsibility for team tasks

A team member needs to accept responsibility for tasks entrusted to him or her. Completing tasks is a cooperative effort. Unless the team pulls together, the work will not get done.

Within a team, members will resume different rules according to their styles, skills and personalities. Some examples of the roles people can adopt are outlines below.

The person who leads the team

The creative person who thinks of new ways of doing things

The person who develops contacts and brings new idea and information to the team

The person who judges accurately and stops the team from making wrong decisions

The person who promotes decision making

The person who puts the team’s idea and goals into reality

The person who puts ideas into practice

The person who delivers on time

These are all desirable roles in team membership. Some members are able to switch or take on various to allow goals to be achieved.

Once roles and styles are identified, allocating responsibility for particular tasks becomes easier. If the task in hand involved research, you need a resource/investigator. If it involves making judgement between alternatives, a monitor/evaluator is needed. A completer/finisher is always necessary to ensure that the task is completed within the given time frame.

Problems, options and solutions

Problems are given to teams to analyse and work through. Within a specified time, a team will be asked to provide some options and solutions. At times when there is no single clear answer, a process of discussion and negotiation will take place.

A good way to assist discussion and negotiation is to hold a brainstorming sessions. This encourages team members to contribute ideas in a non-threatening situation. It is surprising how easily ideas will flow once there is this sort of stimulation. People begin to see things in an innovative way.

Problem solving is the ability to find lasting solutions to complex problems. A successful team is able to focus on the problem, analyse and develop the options and put the solutions into practice.

Task reviewing and re-prioritizing

Many times in an office your carefully planned day and list of things to do today will be upset and thrown into chaos. Some of the reasons for this could be:
  • The unexpected need for you to attend a meeting
  • Having to fill in for an absent staff member
  • Having to attend to a more pressing project
 Designated timelines for tasks

When setting timelines, try to be realistic and operate within the resources at your disposal. Estimating times is difficult, but it will become easier with experience.

If you were asked to key in a 30-pages document on a word processor, how long would it take? It will depend on:
  • The number of other duties you have to complete
  • The complexity or technically of the language in the document
  • The difficult of the layout and design
  • Etc
It may be the organization’s policy for another staff member to help with collating and checking. In any case, when you are striving to meet deadlines, allow some leeway for unexpected interruptions and seek the support of other staff members so that goals and targets are met on time. Cooperating with others is a valuable part of teamwork.

Good time management skills and the ability to prioritize are keys to getting work done according to its degree or urgency. Keep your employer informed of the progress and constantly look for ways to improve your work habits.

Monday, 23 June 2014

Teamwork in the workplace

Schedule Organizing

Team – a group of people who work together to complete certain tasks and achieve particular goals. As soon as there is more than one person working on a given task or towards a common goal, a team is formed. There is no upper limit of people for a team, but when a group becomes larger it may be called a “department”. Some sources state that more than 12 people in a team makes it unmanageable, as the decision making is left to a few and others tend to take a back seat.

Within teams there are people with various strengths and abilities. A team is successful when these attributes are well combined.

Goals – the dictionary defines this word as: “the aims or purposes towards which effort is directed”.

If goals are set realistically, the level of performance is lifted. Often in your personal life you will say things like the following:
  • I would like to finish reading that book by Friday
  • On Wednesday of next week, I must tidy my bookcase
  • Tonight I am going to write a letter to may friend in Rome
  • This time next year I am going to Bali for a holiday
  • In three years’ time I will have saved enough money to buy a new car
 There are things really want to do and will work hard to achieve. The above goals are both short- and long-term in their timeframe. Short-term goals generally take between a few months and a year to achieve, and long-term goals are achievable within two or more years.

Team goals

In a work situation, you immediately become a member of team. Each person has his or her own area of responsibility, as described in the duty statement or job description. Management distributes various duties to staff so that the goals of the organization are reached on a daily or long-term basis. It is important that you know your responsibilities and play your part in completing the tasks which are assigned to you.

The setting of goals should:
  • Lead to higher performance
  • Allow team members to attempt more difficult tasks
  • Lead to higher goals being set (if team members participate in the goal setting)
  • Result in better performance (not simply goal attainment)
  • Give greater job satisfaction
  • Be clear, challenging and relevant to the purpose
  • Define clear roles for the team members
  • Assist in the attainment of the organization’s profit-making expectations
 To work successfully in team, each member should:
  • Respect the skills and expertise others
  • Have clear guidelines and a list of tasks and goals for the work entrusted to him or her
  • Share the decision-making process
  • Contribute to the quality of decisions made
  • Encourage all points of view
  • Seek solution to problem
  • Contribute to a positive team spirit
  • Etc
 Team goals are set in order to improve quality, output, standards, service and performance by using the team’s combined expertise and commitment to the goals

Time ad resources to complete tasks

Take time to analyse the steps involved in completing tasks. Make sure each stage is manageable within a given timeline. Plan to do things in the order of their importance. This is called “prioritizing” and is an important element of time management.

In work situation you will be given tasks to complete within given timelines. The effective use of time will increase you value to the organization. Learn to do the right thing at the right time, with reference to its priority.

“Plan your work and work your plan” is good advice. Writing down you commitments is a useful organization tool.

Sunday, 22 June 2014

Occupational Health and Safety

Power access

            Incorrect use of power to office equipment can case hazards. The following can be prevented by correct use of power access:
  • Electric shock
  • Jolting or falling
  • Burns
  • Fire
             Power accidents can be caused by unsafe work practices, work environments and/or poor insulation.

You should not:
  • Use double adaptors
  • Use frayed leads
  • Force plugs into sockets
  • Attempt to repair an electrical malfunction
 You should:
  • Positioning equipment close to power points
  • Plug in cords when the power is switched off
  • Use a “Standards” approved power board if several items of equipment are in use
  • Start up and use equipment in accordance with manufacturer’s instructions
  • Switch machines off in accordance with manual and manufacturer’s instructions
  • Remove plugs from power sockets by holding the plug (not the cord)
  • Ensure that the correct power sources voltage is used
  • Install and position equipment in accordance with manufacturer’s instructions
  • Refer to manufacturers’ manuals for correct power usage guidelines.
             As well as power dangers, lacerations and cuts from sharp objects and paper should also be prevented.

Safety procedures and work habits

            It is usual foe new office machines and equipment to be covered by supplier’s or manufacturer’s warranty for three to 12 months. This means that inherent defects of the machine will be repaired without charge. Remember that damage caused by misuse will have to be paid for by the owner.

            Organizations may take out maintenance agreements to cover service calls, but replacement parts usually incur an extra charge. The length of time a machine is out of service while waiting for repair (called “down time”) is a serious consideration.

            You can help keep expensive equipment in good working order by observing correct procedures and work habits. Some points to be bear in mind are:

You should not:
  • Eat, drink or smoke when working
  • Use correction fluids near equipment
  • Use household cleaners on machines-they usually contain ingredients that are too abrasive
  • Leave finger marks, dirt or correction fluid on the glass top or white surface of the photocopier
  • Locate your computer adjacent to electronic typewriter or facsimile machines-the magnetic radiation from them will affect the computer’s operation
 You should:
  • Use a soft brush to clean dust particles from keyboards
  • Use correct cleaning materials, for example solutions, sprays, wipes, wands, cleaning brushes and lint-free cloths (check with the supplier for advice)
  • Set up a cleaning materials kit close to the equipment
  • Establish a regular routine (preferably weekly) for cleaning equipment in your care
  • Investigate the availability of computer cleaning kits from chemical suppliers
  • Keep computers out of direct sunlight and make sure that vent have at least 20 mm of space so that the computer can “breathe”. Computers tend to overheat when there is insufficient space for ventilation
  • Use correct start up and shut down procedures to avoid corrupting and losing valuable data

Thursday, 19 June 2014

Type of Financial Documents

             An enquiry from a potential purchaser is the beginning of a financial transaction. The enquiry may be made by phone, in person or by ordinary or electronic mail.

            The potential seller will follow this through by giving details of prices, a description of the goods and services and providing price lists, brochures or catalogues. This will help the enquirer to make a decision.

            It is common practice to ask for quotation so that comparisons are made with quotes submitted by other organizations. Sometimes the purchasing department may ask for three quotations to be obtained.

            When the enquirer becomes a purchaser, the more formal documentation takes place.

Purchase requisition

            A purchase requisition is an internal document. It is not sent to a supplier. When a branch or department of an organization requires the supply of goods or services, a purchase requisition is raised.
            When the requisition is approved, it is sent to the purchasing departments. The purchasing department raises the purchase order.

            The purchase requisition is checked against the goods and services when they are received by the branch or department. The requisition is then moved from the “pending” file to the “completed” file.

Purchase Order

            A purchase order is raised either in response to receiving a purchase requisition or when good are required. A purchase order is an external document, which means that it is sent from the purchaser to a supplier. It is an instruction from one company (the purchaser) to another company (the supplier) to supply certain goods or services on credit. Purchase orders may be sent electronically.

            The purchaser retains a duplicate or an electronic copy of the purchase order. The purchase order records the number of the purchase requisition.

            The duplicate of the purchase order is checked against the invoice when the goods are received. Discrepancies between the purchase order and the delivery are noted and appropriate action is taken.


            An Invoice is raised in response to receiving a purchase order. An invoice is an external document, which means that the original is sent by the supplier to the purchaser. The invoice may be sent either with the goods or by mail. The supplier retains the duplicate.

            An invoice should record the number of the purchase order.

            The delivery docket (a copy of the invoice, but without price) is forwarded with the goods. It is the responsibility of the person receiving the goods to check that the items delivered match the delivery docket and that they are in good condition.
            An invoice is an essential source document. The purchaser records details of the original invoice in the purchases journal, the supplier records details of the duplicate invoice in the sale journal.

Credit Note

            A credit note is raised in response to receiving returned stock, or notification of short supply or overcharging when goods and services have been purchased on credit. The supplier sends a credit note to the purchaser. The purchaser must give a reasonable explanation for the return. The reason for return is shown on the credit note. The supplier retains the duplicate.

            The credit note records the number of the invoice and purchase order.

            A credit note is an essential source document. The purchaser records details of the original credit note in the “purchases returns and allowances” journal; the supplier records details of the duplicate credit note in the “sales returns and allowances” journal.


            A statement is prepared by the supplier and sent to the purchaser, usually every month. For the supplier, the statement mirrors the purchaser’s account in the “account receivable” ledger. A statement is a monthly summary, in chronological (date) order, of all the transactions (invoices, credit notes, receipts and cash discounts) between the supplier and the purchaser. Statements are compiled as at the end of trading on the last day of the month, or other agreed balancing date.

            Statements are essential documents. Statements are not source documents – they are documents against which the supplier and the purchaser validate all other documents (invoices, credit notes, cheque butts and receipts).


            A receipt is raised in response to receiving a cheque, any money (cash or electronic). The supplier sends a receipt to the purchaser. All monies coming into the organization must be receipted; however, not all suppliers actually send receipts to purchaser.

            If the purchaser has claimed a cash discount of the payment will not equal the amount of the account. The amount received and the amount of the cash discount must be recorded on the receipt.

            A receipt is an essential source document. The supplier records details of the receipt in the “cash receipt” journal.

Tuesday, 17 June 2014

Essential and optional financial documents

            Every business transaction for goods or services involves at least two organizations, one doing business purchasing and other doing the selling. Financial documents are generated for every transaction as proof of the transaction. Some documents are essential because they are used to record information about financial transactions in “books of original entry”, otherwise known as “journals”. Other documents are optional, that is they are not required in every business transaction. Journals do not record the information on optional documents.

Guidelines for completing financial documents

            Many documents and books of account are now processed electronically. However, the following guidelines apply to completing financial documents and books of account in a manual system:
  • Handwriting must be legible
  • Figures must be legible and kept in alignment
  • Errors should be ruled out with a pen and the correct figure should be written above
  • Correction should be initiated
  • You should not use correction fluid or erasers to correct errors
 Requirements for financial documents

            Documents raised in an organization for financial purposes have specific requirements for accounting, business, records, taxation and legal purposes. Documents are:
  • “Accountable forms” and must not be destroyed; an “accountable forms” register is kept for audit purposes; unused forms must be stored in a secure place
  • Required to display the name (and other details) of the organization generating the document
  • Numbered consecutively; an alphabetical prefix to the number indicates a series
  • Required to have an original and a duplicate; some organizations may produce even more copies
  • Required to show the date of he transaction
  • Required to record the numbers of the documents to which they refer; this provides an “audit trail”
 Credit transactions

            Businesses mostly conduct transactions on a credit basis. This means that goods or services are not paid for at the time of the transaction. A supplier extends credit to a purchaser. The purchaser must complete an “Application for Credit”. This document outlines the terms of trade established by the supplies and agreed to by the purchaser. Financial documents are usually pre-printed. They are designed to conform to the accounting practices and computer systems of the company.

Terms of Trade – Credit limit

            When negotiating terms of trade, the supplier will set a credit limit for the purchaser. The decision will be based on the purchaser’s financial situation, credit rating, paid up capital, etc.

Nett 30 days

            Most of organizations stipulate Nett 30 days for payment. This means that purchases for a month (say 1-30 June) will appear on the statement prepared by the supplier at the end of June. When the purchaser receives this statement from the supplier early in July, the purchaser has until 31 July to pay the account. If the account is not paid by 31 July, the amount will be “aged” on the statement into the “outstanding 30 days” box.