Sales Cycle — Quotation to Payment

The phone rang in the office. Negi Bhaiya picked it up. "Yes, Bisht Ji... A new customer? Nainital Grand Hotel... They want a quotation for monthly spice supply?... Okay, I'll prepare it."

He hung up and turned to Meera. "Perfect timing. You are about to learn the full sales cycle. A new hotel in Nainital wants to buy spices from Bisht Ji every month. They want a formal quotation first. If they like the prices, they will confirm the order. Then we deliver and send the invoice. Then they pay."

"So it is not just one step?" Meera asked.

"No," Negi Bhaiya said. "A sale is a journey — from the first conversation to the last rupee collected. ERPLite manages every step of that journey. Let me show you."

The Sales Cycle — An Overview

In business, a sale rarely happens in one step. Especially in B2B (business-to-business) transactions — where one company sells to another — there is a formal process.

Here is the full sales cycle:

Customer asks for prices
        ↓
You send a Proforma Invoice (quotation)
        ↓
Customer confirms → You create a Sales Order
        ↓
You deliver goods and send a Tax Invoice
        ↓
Customer pays → You record a Payment Receipt

Let us understand each step:

Think of it like ordering food at a restaurant:

1. You look at the menu (Proforma Invoice — shows you the prices)
2. You place your order with the waiter (Sales Order — confirmed)
3. The food arrives with the bill (Sales Invoice — now pay up)
4. You pay the bill (Payment Receipt — done!)

In ERPLite, each step is linked to the next. A Proforma Invoice can be converted into a Sales Order with one click. A Sales Order can be converted into a Sales Invoice. Everything is connected.

Step 1: Proforma Invoice — The Quotation

The hotel in Nainital — Nainital Grand Hotel — wants to know how much monthly spice supply would cost. Meera needs to send them a Proforma Invoice.

First, she sets up the hotel as a new customer in the Customer Master:

Now she creates the Proforma Invoice.

Meera clicked Transactions → Sales → Proforma Invoice → New.

Item Lines:

Since both Bisht Traders and Nainital Grand Hotel are in Uttarakhand, the GST is intra-state:

• CGST @ 2.5% = Rs. 207.25
• SGST @ 2.5% = Rs. 207.25

Meera clicked Save. The Proforma Invoice was ready.

Important: A Proforma Invoice is NOT a tax invoice. It is just a quotation. It does NOT create any GL entries. It does NOT affect the accounts. It is simply a formal way of telling the customer — "This is what we can offer."

Meera emailed the Proforma Invoice to Mr. Dinesh Rawat at Nainital Grand Hotel.

Step 2: Sales Order — The Confirmation

Three days later, Mr. Dinesh Rawat called back. "We accept the quotation. Please start the monthly supply from 15th July."

Now Meera needed to convert the Proforma Invoice into a Sales Order.

She opened the Proforma Invoice (PI-2025-012) and clicked the button: Convert to Sales Order.

ERPLite automatically filled in all the details from the Proforma Invoice — customer, items, quantities, rates. Meera just had to set the delivery date.

She reviewed everything and clicked Save.

What does a Sales Order do?

A Sales Order is an internal confirmation. It tells the warehouse team: "Get these items ready for delivery on 15th July." It tells the accounts team: "An invoice will be needed soon."

Like the Proforma Invoice, a Sales Order also does NOT create GL entries. It is a planning document, not an accounting document. The accounts are only affected when the actual Invoice is created.

"Think of it this way," Sharma Sir said. "The Proforma is a promise. The Sales Order is a plan. The Invoice is the real thing."

Step 3: Sales Invoice — The Bill

On 15th July, Bisht Ji delivered the spices to Nainital Grand Hotel. Now Meera needed to create the Tax Invoice.

She opened Sales Order SO-2025-008 and clicked Convert to Invoice.

Again, ERPLite carried over all the details. Meera reviewed them:

Sales Invoice:

Item Lines (same as before):

Meera clicked Save as Draft.

Negi Bhaiya reviewed the invoice. He checked:

• Customer details and GSTIN — correct
• HSN codes for each item — correct
• GST rate and calculation — correct
• Invoice total — Rs. 8,704.50 — correct

He clicked Approve & Post.

GL Auto-Posting — What Happened Behind the Scenes

The moment the invoice was posted, ERPLite automatically created these GL entries:

Let us understand each line:

1. Trade Receivables goes UP (Debit): The hotel now owes Bisht Ji Rs. 8,704.50. This is an asset — money that will come in the future.

2. Sales goes UP (Credit): Revenue of Rs. 8,290 is recognized. This is income for Bisht Traders.

3. CGST Payable goes UP (Credit): Bisht Ji collected Rs. 207.25 as CGST from the hotel. He does not keep this money — he owes it to the government. It is a liability.

4. SGST Payable goes UP (Credit): Same logic for SGST — Rs. 207.25 to be paid to the state government.

"You did not write a single journal entry," Sharma Sir pointed out. "You just filled in a sales invoice — customer name, items, quantities. The software did the accounting automatically. The double-entry is perfect. Debit equals credit. Assets equal liabilities plus equity. Everything balances."

This is the power of GL auto-posting. The accountant focuses on the business transaction (who bought what, how much, when). The software handles the accounting logic (which accounts to debit, which to credit, how much).

Step 4: Payment Receipt — Getting Paid

On 10th August, Nainital Grand Hotel paid Bisht Ji. An NEFT transfer of Rs. 8,704.50 appeared in his bank account.

Meera needed to record this payment.

She clicked Transactions → Sales → Payment Receipt → New.

When Meera selected the customer, ERPLite showed the outstanding invoices:

Meera clicked on SI-2025-067 to link this payment to that invoice. The full amount was being paid.

She saved and Negi Bhaiya posted it.

GL Entry for Payment Receipt:

Bank goes UP (money received). Receivables go DOWN (the hotel no longer owes anything). Simple and clean.

The Complete Flow — Tracing the Journey

Let us trace the entire journey from start to finish:

In ERPLite, you can see this entire chain. When you open the Sales Invoice, there is a section called Document Trail or Linked Documents that shows:

PI-2025-012 (Proforma) → SO-2025-008 (Order) → SI-2025-067 (Invoice) → RV-2025-015 (Receipt)

"This is very useful for auditing," Sharma Sir said. "If the tax department asks — show me the original quotation for this invoice — you can trace it back in seconds. Everything is connected."

What About Partial Payments?

"What if the customer doesn't pay the full amount at once?" Meera asked. Good question.

Let us say Nainital Grand Hotel paid only Rs. 5,000 now and promised to pay the rest later.

Meera would create a Payment Receipt for Rs. 5,000. The outstanding balance on Invoice SI-2025-067 would go from Rs. 8,704.50 to Rs. 3,704.50.

When the hotel pays the remaining Rs. 3,704.50, she would create another Payment Receipt and link it to the same invoice.

ERPLite keeps track of how much is paid and how much is pending for each invoice. This is how the Aged Receivables report works — it shows which invoices are partially paid and how old the outstanding amount is.

What About Inter-State Sales?

All our examples so far have been within Uttarakhand (intra-state). What happens when Bisht Ji sells spices to a customer in another state — say, a restaurant in Delhi?

The only difference is the GST treatment:

The total GST amount is the same (5% of Rs. 8,290 = Rs. 414.50). But how it is split changes:

ERPLite handles this automatically. It looks at the state code in the seller's GSTIN and the buyer's GSTIN. If they match (both 05), it applies CGST + SGST. If they don't match (05 and 07), it applies IGST.

You don't need to remember which one to apply. Just make sure the customer's GSTIN is correct in the Customer Master. The software does the rest.

Skipping Steps — Is It Allowed?

"Do I always have to create a Proforma Invoice first?" Meera asked. "What if a customer just walks in and wants to buy immediately?"

"Good question," Negi Bhaiya said. "Not every sale needs all four steps. You can skip steps."

"The Proforma Invoice and Sales Order are optional," Sharma Sir added. "They are planning tools. The Sales Invoice is mandatory — without it, there is no sale in the books. And the Payment Receipt is needed to record that the money came in."

In ERPLite, you can create a Sales Invoice directly without creating a Proforma Invoice or Sales Order first. The system is flexible.

A Summary of the Sales Documents

Here is a handy reference for all four documents:

Quick Recap

• The sales cycle has up to 4 steps: Proforma Invoice → Sales Order → Sales Invoice → Payment Receipt
• Proforma Invoice is a quotation — it does NOT affect the accounts
• Sales Order is an internal confirmation — also does NOT affect the accounts
• Sales Invoice is the tax bill — this is where GL entries are created (Receivables, Sales, GST Payable)
• Payment Receipt records the customer's payment (Bank goes up, Receivables go down)
• ERPLite can convert documents: Proforma → Sales Order → Invoice with one click
• GL auto-posting means the software creates the journal entries automatically — you just fill in the business details
• Intra-state sales use CGST + SGST; inter-state sales use IGST — ERPLite determines this from the GSTINs
• You can skip steps — not every sale needs a Proforma Invoice or Sales Order
• Partial payments are supported — ERPLite tracks outstanding amounts per invoice
• The Document Trail links all related documents for easy tracing and audit

Practice Exercise — Try This Yourself

Bisht Ji gets a new customer: Hill View Cafe, Mukteshwar (GSTIN: 05AABHV3456F1Z7). They want a monthly supply of:

• Garam Masala: 2 kg at Rs. 520/kg
• Red Chilli Powder: 3 kg at Rs. 280/kg
• Turmeric Powder: 4 kg at Rs. 180/kg

Tasks:

1. Calculate the sub-total (before GST) for this order.

2. Calculate the GST. This is an intra-state sale (both in Uttarakhand). What is the CGST and SGST amount?

3. What is the grand total (sub-total + GST)?

4. Write the GL entry that ERPLite will create when the Sales Invoice is posted.

5. Two weeks later, Hill View Cafe pays Rs. 2,000 by NEFT. Write the GL entry for this partial payment.

6. After the partial payment, what is the outstanding balance on this invoice?

7. If Hill View Cafe was in Himachal Pradesh instead of Uttarakhand, how would the GST treatment change? What would the IGST amount be?

Bonus: Draw the document trail for this transaction — from Proforma Invoice to Payment Receipt — with document numbers you make up yourself.

Fun Fact

The concept of a "sales invoice" is ancient. The oldest known invoice was found in Mesopotamia (modern-day Iraq), written on a clay tablet around 2,000 BCE. It recorded the sale of barley. The seller, the buyer, the quantity, and the price — all recorded. Four thousand years later, Meera is doing the exact same thing in ERPLite for Bisht Ji's spices. The medium changed — from clay tablets to paper to software. But the idea is the same: when you sell something, write it down. Record what was sold, to whom, for how much, and when. That is the heart of accounting, and it has not changed in 4,000 years.