Consider the information trail for a typical sale:
- Customer Purchase Order
- Sales Order
- Signed Delivery Order
- Sales Invoice
- Accounting Entry
- Customer and General Ledgers
- Financial and Management Reports
- Management Decision
Each document has a distinct role.
The Purchase Order records the customer’s request. The Sales Order records the supplier’s acceptance. The signed Delivery Order provides evidence of fulfilment. The Sales Invoice normally supports the recognition of revenue and the customer receivable.
Weaknesses anywhere in this flow can affect the reliability of management information.
For example:
- A completed delivery that is not invoiced may understate revenue and delay collection.
- An invoice issued without adequate delivery evidence may result in a customer dispute.
- An incorrect price or quantity may distort revenue and job profitability.
- Incomplete records may prevent management from identifying overdue accounts or poorly performing jobs.
Financial management therefore begins before the monthly report is prepared. It starts with reliable source documents, consistent processing and a clear information trail.