Letter of Enquiry (Junior Cert Business Studies): Revision Notes
📚Revision Notes
Letter of Enquiry
What is a letter of enquiry?
A letter of enquiry is a business document sent by a potential buyer to suppliers when they want to find out information about goods or services before placing an order. Think of it as doing your homework before making a purchase - businesses need to compare different suppliers to get the best deal.
When a business needs supplies, they don't just pick the first supplier they find. Instead, they contact several different sellers to compare what's available, how much it costs, and what the payment and delivery arrangements are. This helps them make an informed decision and potentially save money.
Note
The enquiry process is essential for making smart business decisions. By comparing multiple suppliers, companies can often negotiate better prices and terms than they would get from their first choice.
Questions asked in a letter of enquiry
A letter of enquiry focuses on finding out about the terms of sale. These are the important details that both buyer and seller need to agree on before any transaction happens.
Important
Terms of sale refers to the payment and delivery details that a buyer and a seller agree on during a transaction.
The letter typically asks about:
- Availability - Will the goods be ready when we need them?
- Pricing - How much will the goods cost?
- Bulk discounts - Are there cheaper prices for buying large quantities?
- Delivery arrangements - When will goods arrive and what will shipping cost?
- Payment methods - How and when must we pay?
- Credit options - Can we pay later instead of upfront?
Payment options commonly enquired about
When businesses enquire about payment methods, they often ask about these common options. Understanding these payment terms is essential for cash flow management and helps businesses plan their finances effectively.
Note
Cash with order (CWO) means the goods must be paid for when they are ordered.
Note
Cash on delivery (COD) means the goods must be paid for when they are delivered.
Many businesses also enquire about credit sales, where they can receive goods immediately but pay for them at a later date (such as 30 days later). This arrangement helps with cash flow management.
Credit sales enquiries
Credit sales are particularly important for businesses because they allow companies to get the goods they need without immediate payment. This helps businesses manage their cash flow better - they can sell the goods and generate income before having to pay their supplier.
Important
Credit sales are goods and services sold on credit, for which payment will be received at a later date.
When a supplier receives an enquiry about credit terms, they need to check the buyer's creditworthiness first. This involves checking how likely the customer is to pay within the agreed timeframe. Suppliers can do this through:
- Trade reference - asking for references from other businesses the customer has dealt with
- Bank reference - getting confirmation from the customer's bank about their financial situation
- Credit status agency - using specialist companies that provide credit information
How to handle letters of enquiry
Proper handling of enquiries is crucial for both buyers and sellers. The process requires attention to detail and good record-keeping to ensure successful business transactions.
For the buyer (sending the enquiry)
Before sending a letter of enquiry, the potential buyer should:
Note
Essential Steps for Buyers:
- Check the supplier's details carefully (name, address, contact information)
- Be clear about exactly which goods and quantities they need
- Keep a copy of the enquiry for their records
For the seller (receiving the enquiry)
When a supplier receives a letter of enquiry, they should:
Note
Essential Steps for Suppliers:
- Check whether the requested goods are in stock
- Verify current pricing
- Prepare a detailed quotation with all terms
- File a copy for future reference
Practical example
Example
Worked Example: Fitness First Equipment Enquiry
Consider Fitness First, an Irish gym chain that needs to update its equipment. Rather than immediately ordering from their usual supplier, they would send letters of enquiry to several fitness equipment suppliers across Ireland.
Step 1: Identify Requirements Their enquiry might ask about the availability and cost of treadmills, weights, and exercise bikes.
Step 2: Compare Terms They would also enquire about bulk discounts (since they're buying for multiple gyms), delivery schedules to different locations, and whether they can pay on credit terms rather than upfront.
Step 3: Make Informed Decision This approach allows Fitness First to compare offers from multiple suppliers and negotiate the best deal for their business.
Key concepts to remember
Throughout this process, businesses must focus on gathering comprehensive information to make informed decisions. The enquiry process is fundamental to successful procurement and helps establish strong supplier relationships.
Summary
Key Points to Remember:
- A letter of enquiry helps businesses gather information before making purchasing decisions
- The main focus is on terms of sale - payment and delivery arrangements
- Common payment options include cash with order (CWO), cash on delivery (COD), and credit sales
- Credit sales require checking the buyer's creditworthiness through references or agencies
- Both buyers and sellers should keep copies of enquiries and responses for their records