In this chapter Jack goes through the process of setting up LedgerSMB for his trade activities in computer parts, which includes deciding which parts he wants to resell. From there on he goes to contact a vendor to request a quotation, convert that to an order and receive goods into inventory and invoices into accounts payable.
To prepare LedgerSMB for his parts sales and purchases, Jack needs to configure Parts. The system records inventory for parts and assemblies. Jack won’t use them for his business. There’s more on assemblies in @@@.
Once set up, Jack is ready to execute the ordering process. Even though the process is described here from a purchasing perspective sales work the same way with the roles reversed (Jack will act as a vendor in the sales process).
To start his purchase, Jack creates a RFQ document which he sends one or multiple vendors to let them know he’s interested in their products.
The vendor responds to Jack’s request by issuing a Quotation. From a legal perspective a quotation is a document which promises to deliver the requested goods or services at a certain rate - subject to conditions specifically mentioned. If Jack accepts the quotation and meets the conditions, the vendor is obligated to deliver.
In response to the quotation, Jack will place an order with the vendor to indicate acceptance quotation (or he can let the it expire). When he places the order, that legally means he agrees to the terms and conditions in the quotation. If the vendor delivers the goods or services as per the order, Jack has accepted the legal obligation to pay.
The vendor responds to the order by shipping the goods and services as well as sending an invoice. The invoice legally means the vendor considers to have a claim on the assets of Jack’s company. Jack creates a vendor invoice in his system to record the claim on his company by the vendor and the vendor creates a sales invoice in their system to do the same.
As a result of the above it’s considered bad practice to delete or change invoices once created. The accepted process to adjust invoices is to generate a debit invoice (for purchases) or a credit invoice (for sales) to “undo” the effects of the invoice and letting the other party know about it. Then a new invoice can be generated with the appropriate content. However, when the order process is correctly followed from order to invoice chances of sending the wrong invoice are greatly reduced.