From request to payment: the steps of a purchase order

The usual order is: ask, get a quote, approve, send the PO, receive, check the bill, pay. Wikipedia's accounts payable article describes one typical chain, from collecting supply requirements through quotes, purchase orders, delivery inspection and invoice approval.¹

What you need

• A way to record requests, even if it's a shared form.
• Someone who can approve spending.
• A list of your usual suppliers.
• A person who receives deliveries and isn't the person who approves payment, where your team is big enough.
• A place to keep each PO, delivery note and supplier bill together.

The steps

First, someone asks for it

An internal request tells the buyer what's needed. Wikipedia calls this a purchase order request or purchase requisition, a request sent internally within a company to obtain purchased goods and services.²

Small teams often do this by email or a form. That's fine. Just make sure the request is written down and names the item and the amount.

Next, you get a quote

The process starts with collecting supply requirements and seeking quotes from vendors.¹ A quote is the supplier's offer: item, price, and how long it holds.

The request is approved

Someone with the authority says yes. In ERPNext's manual, the steps for a PO include saving the draft and obtaining the required approval before submitting.³ Approval limits covers how limits are set.

The PO is prepared and sent

Once the deal is negotiated, purchase orders are prepared and sent.¹ In software that handles the whole cycle, creating the PO is typically the first step of the purchase-to-pay process.² Fields are covered in what a PO is.

The goods arrive

The goods delivered are inspected on arrival.¹ In ERPNext, a Purchase Receipt records what physically arrived and increases stock for stock items.³ The dock-side routine has its own page, how to check a delivery.

The supplier's bill is checked

The invoice received is routed for approvals.¹ In ERPNext, a Purchase Invoice records the supplier bill and creates the payable and other accounting entries.³ The check compares the bill with the PO and the receipt, which is three-way matching.

Last, you pay

ERPNext's manual says a Payment Entry settles money paid.³ Do this after the bill is approved, and by the terms on the PO.

Where steps get skipped

• No request. Someone just orders. Now the buyer finds out after the fact.
• No receipt. The bill arrives and nobody knows whether the goods did.
• PO after the bill. The PO can no longer check anything. Some organizations refuse to pay invoices that don't carry a PO number. Wikipedia mentions that policy.²

If your team is tiny, you can still keep every step. One person might do three of them. The records are what count: a request, a PO, a receipt, a bill, a payment.