Documents Used in Home Trade 5

b) Posta pay

This is an Electronic Fund Transfer (EFT) service offered by the postal corporation of Kenya, for sending and receiving money instantly from various destinations both locally and internationally.

-The person sending money fills in a form called ‘send form’ giving the following details;

Name, address and telephone number of sender

Name, address and telephone number of receiver

Pay city, town and location of the receiver

Signature of the sender

Amount to be sent

-The sender hands over the form, the amount of money to be sent and the commission to the post office clerk for processing

-The transfer is done via the internet through a machine that gives a twelve digit number for the transaction called the ‘Transaction control
number’(TCN).The sender then conveys this number, amount sent and pay location to the recipient and instructions to the recipient to visit the named post office for payment.

This message is usually conveyed through the
quickest means possible such as a telephone call
-The sender is given a copy of the processed ‘send form’ as proof that money has been sent. The post office retains the original for record purposes.

-When the receiver visits the post office, he/she will fill a ‘receiver form’giving the following details;

i) The transaction number(i.e. the twelve-digit number)
ii) The expected amount
iii) The name, address and telephone number of the sender
iv)The city town or location of the sender
v) Signature of the receiver

The receiver then identifies himself or herself by producing an ID card or passport before receiving the money.

-The recipient/payee is then given the money, a copy of the receive form as proof of having received the money. The paying post office retains a copy as proof of payment.

Advantages of using Posta pay as a means of payment

i) Accessibility-Posta pay outlets (post offices) are located countrywide to eliminate movement over long distances to get money

ii) Ease of use-Sending or receiving money is easy as one only needs to fill a form which is processed immediately

iii) Speed-the transfer of money is instant (fast)

iv)Security-Confidentiality in the transmission of money is provided and money is only paid to the person intended

v) Convenience-Posta pay services are offered for long hours during the day and pay locations are conveniently located

vi)Affordability-Posta pay services are relatively affordable as large amounts can be sent at reasonable costs.

c) Postal orders

-Postal orders are sold by the post office for the purpose of remitting money

-They are available in fixed denominations of sh.5, 10.20,40,60,80,100 and 200

-On buying a postal order, the sender pays for both the face value of the postal order and a commission charged for the service

-Postal orders just like money orders are issued with counterfoils that the sender will keep as evidence of remittance in case the person to whom he/she remits the money does not receive it.

The sender writes the name of the payee on the postal order as a safety measure
Payment to the bearer can be made in any post office with postal order facilities

Postal orders may also be crossed or open (see crossed and ordinary money orders)

Circumstances under which postal orders are appropriate

i) Where the amounts involved are small

ii) Where it is the only means available

iii) Where there is need to avoid inconveniences and risks associated with the other means of payment.

Differences between postal orders and money orders
Postal orders Money orders

a) It can be cashed at any post
office
a) Can only be cashed at a specific
post office
b) Are in fixed denominations b)Varies according to the needs of
the remitter
c) Does not require any application
form to make a remittance
c)Requires the filling of an
application form in making
remittance
d) Can be cashed by the bearer d)Can only be cashed by the payee
e) Value can be increased by
affixing revenue stamps
e)Value cannot be increased by
affixing revenue stamps
d) Postage stamps

Postage stamps may be used to pay small amounts of money.

The person to whom the stamps are sent can then use them for sending mail and/or to pay someone else.

e) Premium Bonds

Premium bonds are issued

by the post office in denominations of sh.10 and sh.20.They mature after a given period, after which one can cash them.

-Bearers can also enter into draws so as to win money.

-Premium bonds can be used to settle debts, but it is not a safe method because they can be cashed by anybody i.e. by the bearer.

Circumstances under which postage stamps and premium bonds are used

i) Where the amounts involved are small

ii) Where they are the only means available.

Means and payments which arise from private arrangements between the sellers and the buyers

There are various business documents that originate from private agreements between buyers and sellers.

The buyer acknowledges the credit and accepts to pay at specified future dates by signing some documents.

These documents include;

a. I Owe you(IOU)
b. Bill of exchange
c. Promissory note.
a) Bill of Exchange

This is unconditional order, in writing, addressed by one person to another,requiring the person to whom it is addressed by one person to another,requiring the person to whom it is addressed to pay on demand, or at a stated
future date, the sum of money on the bill to the drawer, or a named person or to a bearer.

i) Order-is a command not a request

ii) Unconditional-Without condition i.e. no use of such words as ‘if’ or‘whom’

iii) The bill must be in writing

iv)Amount of money must be clearly stated

v) Payee must be named. He/she can be the drawer or someone else or the bearer

vi)Date of payment must be stated or can be determined e.g. ‘Two months from the date of today’ or Three days after 31st January 2012’

-A bill of exchange is prepared by a creditor to a debtor when a creditor wants to be assured of payment by a debtor on a given future date or when asked to do so by the creditor

-If the buyer/debtor signs the bill “accepted” then he/she cannot deny responsibility for the debt since he/she has acknowledged responsibility for the date.

Procedure for preparing a bill of exchange
A bill of exchange is written by a person (creditor) to his debtor to seek assurance that the debtor would pay the debt.

Step 1.
The creditor prepares the draft and sends to the debtor.

Step 2.

The draft and after accepting the conditions laid therein, he/she signs on it and write the words “accepted”. He/she then sends it back to the creditor. At this point the draft becomes a bill of exchange.

Step 3.

The creditor receives the bill and may:

i) Keep it until maturity when he would present
it to the debtor(accepted) for payment

ii) Discount it with a bank. This is presenting to a bank or any financial institution and receiving cash against it before the maturity date. One is however charged(discounting charge) for the service

iii) Negotiate it-Using it to pay someone else apart from the payee.

Parties to a bill of Exchange

i) Drawer

This is the person who gives the debtor the written order to pay the value of the bill of exchange(the creditor)

ii) Drawee

This is the person to whom the order to pay is given (Debtor).He or she accepts the bill.

iii) Payee

This is the person to whom the payment is to be made. The payee may be the drawer, or Essentials of a bill of Exchange

i) It must be signed by the drawer(creditor)

ii) It must be accepted by the drawee(debtor)

iii) It must be accepted unconditionally

iv)It must bear appropriate revenue stamps

NOTE: A bill of exchange becomes a means of payment when it is presented(discounted) to the banks or negotiated.

Advantages of using a Bill of exchange

i) The holder may pass rights on the bill to another person

ii) Date of payment is determined

iii) Acceptance by the debtor makes it legally binding

iv)The payee may receive money before due dates by discounting

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