The purchase-to-pay cycle

Before you start, open these pages: Purchases / Purchase orders, Stock / Goods receipts and Purchases / Bills.

Can’t find one? It may be turned off for your business, or your account may not be allowed to open it. Ask the person who set up your FeePrime. They can fix both.

Buying is selling in reverse, and FeePrime treats it the same way. Separate documents, each answering one question, linked together so you can follow the chain.

The five steps

   RFQ              "what would you charge for this?"
     |               sent to one or more suppliers
     v
   SUPPLIER QUOTE   their answer, with a date it runs out
     |
     v
   PURCHASE ORDER   "we are ordering it"
     |               a commitment. Marks stock as on its way
     v
   GOODS RECEIPT    what actually arrived
     |               this is what moves stock
     v
   BILL             what the supplier says you owe
                     checked against the order and the receipt

As with selling, few purchases use all five.

A quick buy from a supplier you know goes straight to an order, or even straight to a bill. The chain is there for when the money justifies it.

The three-way check

The reason this is worth doing properly is the oldest control in business, and FeePrime has the three documents that make it possible.

• The purchase order says what you agreed to buy, and at what price.
• The goods receipt says what actually turned up.
• The bill says what the supplier wants paying.

When all three agree, pay it.

When they do not, you have caught something before the money left. A short delivery billed in full. A price that crept up between the order and the bill. Goods nobody ordered.

Without the middle document, you are comparing a bill against an order and hoping that what arrived matched one of them.

Each step happens once, at the document that knows

Same rule as the inventory course, from the other side.

A goods receipt brings stock in. A bill attached to a purchase order does not move stock, because the receipt already did.

A standalone bill, with no purchase order behind it, does move stock. Because nothing else has.

Where the money is really won or lost

Most people put their effort into negotiating the price.

The price is on the order, and it is usually the part that goes right.

What goes wrong is in the middle. The short delivery nobody recorded. The substitution accepted at the gate. The damaged carton signed for because the driver was waiting.

Every one of those is money. And every one is invisible unless somebody writes down what actually arrived instead of what was expected.

That is why the receipt lesson in this course is the long one.

Try it

On staging.feeprime.com, open the purchase orders, goods receipts and bills lists side by side, without creating anything.

Notice they are the same list page you already know.