Procure to Pay Transactions in NetSuite

SuiteFoundation Series

What do you know about the procure to pay transactions in NetSuite? In this blog, we’re going to look at this process, including the key features involved, the entire standard procure to pay workflow, and the GL impact of specific transactions.

Key Features to Enable

First, what are the key features that should be enabled in your account for you to be able to use the procure to pay transaction processes? Some of these features are self-explanatory. For example, A/P, Purchase Orders, and Purchase Requests are definitely features that you should enable.

A less intuitive feature, however, is Advanced Receiving. Advanced Receiving allows companies to receive the items in an order before they enter the bill for the order. Separating item receipt from billing allows companies to have greater control over both steps. The rest of this blog will operate under the assumption that the Advanced Receiving feature has been turned on.

Procure to Pay Workflow

The following diagram represents the standard procure to pay workflow. The green tiles demonstrate specific actions in the process, while the blue tiles represent the transactions that are involved. Notice that the same essential transaction that started as a purchase request will eventually convert to a purchase order, an item receipt, and a vendor bill. In NetSuite, all these transactions are connected, allowing users to move the transaction from one type to the next with the click of a button.

Keeping this general workflow in mind, let’s take a look at each transaction record individually.

Purchase Request

The first transaction record in this process is the purchase request. Purchase requests ensure that users get approval from a supervisor before they can submit a purchase order. Because purchase requests are a purely internal transaction, they have no GL impact. They simply serve to initiate the purchasing process. However, the purchase request does have all the information that will eventually be used in the purchase order, item receipt, and vendor bill. This information includes things like the name of the vendor, the items that will be purchased, and the expected cost of those items.

Purchase Order

The second transaction record in this process is the purchase order. A purchase order is simply the form that your company sends to your vendor, requesting specific items. Once a purchase request has been approved by an appropriate supervisor, then it will automatically convert to a purchase order, and NetSuite will send it along to the vendor. As with purchase requests, purchase orders have no GL impact. At this point in the process, no money has actually changed hands yet. A purchase order is simply your company’s way of telling your vendor, “we would like to buy this thing from you.”

Item Receipt

After your vendor receives your order and fulfills your order, you will use an item receipt record to confirm that you have indeed received the order in your warehouse. Because each transaction record in the process is connected, you wouldn’t create a new record for the item receipt. Rather, you would go to the original purchase order for the item and confirm on the order that the item has been received, which will cause NetSuite to generate an item receipt record. Alternatively, you can go to the entire list of orders that are pending receipt (Transactions > Purchases > Receive Orders) and select “Receive” next to the order or orders that you would like to receive.

Partial Receipt

On orders that involve multiple items or multiple kinds of items, sometimes the vendor may fulfill your order in separate stages. When that happens, you would need to mark the order as partially received. To do this, simply check the “Receive” box next to the specific items on the order that have been received and save the record. The original purchase order will have the status of Partially Received, and the purchase order will clearly demonstrate which items have been received and which items have not yet been received.

Vendor Bill

Once you have received either all or part of an order and once your vendor has sent you their bill, you are ready to create a vender bill record in NetSuite. To do this, go to the original purchase order, which will have the status Pending Billing, and select the Bill button. NetSuite will then generate a vendor bill record.

GL Impact

When the vendor bill is initially created, it has the status of Open. An open vendor bill will appear in your Accounts Payable, informing your A/P clerks that the bill needs to be paid. If, on the vendor bill record, you included a due date for the bill, then it will appear on aging reports, ensuring that the payment will be made on time.

Vendor Bill Variances

On occasion, the bill that your vendor sends you may not match the item receipt. If the price on the vendor bill changes after the items have been received, then the variance would need to be posted to a variance account. To post these variances, navigate to Transactions > Payables > Post Vendor Bill Variances.

Conclusion

Understanding the procure to pay process and the transactions that are involved ensures that your company can adequately handle the entire purchasing process. If this post helped you understand NetSuite better, be sure to subscribe to our mailing list below to receive future posts directly in your inbox once a week!