Record Purchases with Purchase Invoices and Orders
You create a purchase invoice or purchase order to record the cost of purchases and to track accounts payable. Purchase invoices and purchase orders are also used to dynamically update inventory levels, meaning you can minimize inventory costs and provide better customer service. The purchasing costs, including service expenses, and inventory values that result from posting purchase invoices or orders contribute to profit figures and other financial key performance indicators (KPIs) in your Role Center.
Record Purchases with Purchase Invoices
When you receive the inventory items or the purchased service is complete, post the purchase invoice to update inventory and financial records and to activate payment to the vendor according to the payment terms. Making Payments.
Do not post a purchase invoice for physical items until you receive the items and know the final cost of the purchase, including any additional charges. Otherwise, your inventory value and profit figures may be skewed.
Create a and post purchase invoice
The following describes how to create a purchase invoice. The steps are similar for a purchase order. The main difference is that purchase orders have additional fields and actions for physical handling of items.
Choose the icon, enter Purchase Invoices, then choose the related link.
In the Vendor field, enter the name of an existing vendor.
Other fields on the Purchase Invoice page are now filled with standard information for the selected vendor. If the vendor is not registered, follow these steps:
- In the Vendor field, enter the name of the new vendor.
- In the dialog box about registering the new vendor, choose Yes.
- To learn more on how to fill in the vendor card, go to Register New Vendors.
- When you've completed the vendor card, choose OK to return to the Purchase Invoice page.
Fill in the remaining fields on the Purchase Invoice page as necessary. Hover over a field to read a short description.
You are now ready to fill in the purchase invoice lines with items or resources that you've purchased from the vendor.
If you have set up recurring purchase lines for the vendor, such as a monthly replenishment order, then you can insert these lines on the invoice by choosing the Get Recurring Purchase Lines action.
On the Lines FastTab, in the Item No. field, enter the number of an inventory item or a service.
In the Quantity field, enter the number of items to be purchased.
The Line Amount field is updated to show the value in the Direct Unit Cost field multiplied by the value in the Quantity field.
The price and line amount are shown with or without sales tax depending on what you've selected in the Prices Including Tax field on the vendor card.
The totals fields under the lines are automatically updated as you create or modify lines to display the amounts that will be posted to the ledgers.
In the Invoice Discount Amount field, enter an amount that should be deducted from the value shown in the Total Incl. Tax field at the bottom of the invoice.
If you have set up invoice discounts for the vendor, then the specified percentage value is automatically inserted in the Vendor Invoice Discount % field if the criteria are met. The related amount is inserted in the Invoice Discount Amount field.
When you receive the purchased items or services, choose Post.
The purchase is now reflected in inventory, resource ledgers, and financial records, and the vendor payment is activated. The purchase invoice is removed from the list of purchase invoices and replaced with a new document in the list of posted purchase invoices. For more information on what happens when you post purchase documents, see Posting Purchases.
In rare cases, the posted amounts may deviate from what is displayed in the totals fields. This is typically due to rounding calculations in relation to value-added tax (VAT) or sales tax.
To check the amounts that will actually be posted, go to the Statistics page, which takes the rounding calculations into account. Also, if you choose the Release action, the totals fields will be updated to include rounding calculations.
Once the invoice has been posted, you can find it in the list of posted invoices. Both the Posted Sales Invoices list and the Posted Purchase Invoices list show the posted invoices with the final invoice numbers. From the list, you can look up each posted invoice, and you can correct or cancel a posted invoice.
For each posted invoice, you can look up statistics, dimensions, and the ledger entries that are the result of the posted invoice. You can also print or send the posted invoice.
You can easily correct or cancel a posted purchase invoice before you pay the vendor. This is useful if you need to correct a typing mistake or change the purchase early in the order process. Learn more at Correct or Cancel Unpaid Purchase Invoices. If you've already paid for items or services on the posted purchase invoice, then you must create a purchase credit memo to reverse the purchase. Learn more at Process Purchase Returns or Cancellations.
Open the Posted Purchase Invoices list in Business Central.
Purchasing non-inventory items
The lines on a purchase invoice can be of the Resource or Item type. Item cards can be further classified as of the Inventory, Service, or Non-Inventory type, which specifies if the item is a physical inventory unit, a labor time unit (also applicable for resources), or a physical unit that is not kept in inventory. Learn more at Register New Items. The purchase invoice process is the same for all mentioned types.
With the Resource purchase line type, you can also purchase external resources, for example, to invoice a vendor for work delivered. Learn more at Set Up Resources.
To use a purchased resource, you may need to set the resource's capacity and manually assign it to a job. Purchasing a resource creates a resource ledger entry; however, resource ledger entries are not tracked for quantity and value as, for example, items are. If quantity and value tracking is required, then consider using other line item types.
When to use purchase orders
You must use purchase orders if your purchasing process requires you to record partial receipts of an order quantity, for example, because the full quantity is not available at the vendor. If you deliver sold items directly from your vendor to your customer as a drop shipment, you must also use purchase orders. Learn more at Make Drop Shipments.
In all other aspects, purchase orders work the same as purchase invoices. The following procedure is based on a purchase invoice. The steps are similar for a purchase order.
Receive items with a purchase order
The following describes how to receive items with a purchase order.
Choose the icon, enter Purchase Orders, then choose the related link.
Open an existing purchase order, or create a new one.
In the Qty. to Receive field, enter the received quantity.
If the received quantity is more than the quantity on the purchase order, and the vendor has been set up to allow over-receipts, use the Over-Receive field to handle the excess quantity. Learn more in the To receive more items than ordered section.
Choose the Post action.
The value in the Qty. Received field is updated. If this is a partial receipt, the value is lower than the value in the Quantity field.
If you use a warehouse handling, you can't use the Post action on the purchase order to register receipt. That's because a warehouse employee has already posted the purchase order quantity as received. Learn more at Design Details - Inbound Warehouse Flow.
Receive more items than ordered
When more goods arrive than were ordered, you may want to receive them instead of canceling the receipt. For example, it may be cheaper to keep the excess items in inventory than return them, or your vendor may offer a discount for keeping them.
Set up over-receipts
Create over-receipt codes to define a percentage by which a received quantity can exceed the ordered quantity. Specify the percentage in the Over-Receipt Tolerance % field. You then assign the code on the Item Card or Vendor Card pages for items and vendors.
- Choose the icon, enter Over-Receipt Codes, then choose the related link.
- Fill in the fields as necessary. Hover over a field to read a short description.
Assign the over-receipt code to an item
- Choose the icon, enter Items, then choose the related link.
- Open the Item Card page for the item.
- In the Over-Receipt Code field, choose the code that contains the percentage you want to allow for over-receipts.
The over-receipt code is assigned to the item. Purchase orders or warehouse receipts for the item now allow you to receive more than the ordered quantity within the over-receipt tolerance percentage.
You can set up an approval workflow requiring over-receipts to be approved before they can be handled. Select the Approval Required checkbox on the Over-Receipt Codes page. Learn more at Create Workflows.
Over-receive an order
On purchase lines and warehouse receipt lines, the Over-Receipt Quantity field is used to record over-received quantities, meaning quantities exceeding the ordered-quantity value in the Quantity field.
When you handle an over-receipt, you can increase the value in the Qty. to Receive field to the quantity actually received. The Over-Receipt Quantity field updates to show the excess quantity. Alternatively, you can enter the excess quantity in the Over-Receipt Quantity field. The Qty. to Receive field updates to show the ordered quantity plus the excess quantity. The following procedure described how to fill in the Qty. to Receive field.
On a purchase order or a warehouse receipt document where the received quantity is higher than ordered, enter the quantity actually received in the Qty. to Receive field.
If the increase is within the tolerance specified by an assigned over-receipt code, the Over-Receipt Quantity field updates to show the quantity by which the value in the Quantity field is exceeded.
If the increase is over the tolerance, the over-receipt isn't allowed. Investigate whether another over-receipt code will allow it. Otherwise, only the ordered quantity can be received, and the excess quantity must be handled another way, such as returning it to the vendor.
Post the receipt as you would any other receipt.
Business Central does not automatically handle financial aspects of over-receipts. You must manually handle this in agreement with the vendor, for example, by the vendor forwarding a new or updated invoice.
External document number
On purchase documents and journals, you can specify a document number that refers to the vendor's numbering system. Use this field to record the number that the vendor assigned to the order, invoice, or credit memo. You can then use the number later if, for some reason, you need to search for the posted entry using this number.
The Ext. Doc. No. Mandatory field in the Purchases & Payables Setup page specifies whether it is mandatory to enter an external document number in the following situations:
In the Vendor Invoice No. field, Vendor Order No. field, or the Vendor Cr. Memo No. field on a purchase header
In the External Document No. field on a general journal line, where the Document Type field is set to Invoice, Credit Memo, or Finance Charge Memo, and the Account Type field is set to Vendor.
If you select this field, it will not be possible to post an invoice, a credit memo, or the type of general journal line described above without an external document number.
The external document number is included in posted documents where you can search by the relevant number. You can also search using the external document number when navigating on vendor ledger entries.
A different way to handle external document numbers is to use the Your Reference field. If you use the Your Reference field, the number will be included in posted documents, and you can search by it in the same way as for values from External Document No. fields. But the field is not available on journal lines.
On a purchase document, you can choose between the following posting actions:
- Preview Posting
- Post and Print
- Post Batch
When a purchase document is posted, the vendor's account, the general ledger (G/L), the item ledger entries, and the resource ledger entries are updated.
For each purchase document, a purchase entry is created in the G/L Entry table. An entry is also created in the vendor's account in the Vendor Ledger Entry table and a G/L entry is created in the relevant payables account. In addition, posting the purchase may result in a value-added tax (VAT) entry and a G/L entry for the discount amount. Whether an entry for the discount is posted depends on the contents of the Discount Posting field on the Purchases & Payables Setup page.
For each purchase line, as applicable, entries are created in the:
- Item Ledger Entry table if the purchase line is of the Item type.
- G/L Entry table if the purchase line is of the G/L Account type.
- Resource Ledger Entry table if the purchase line is of the Resource type.
In addition, purchase documents are always recorded in the Purch. Recpt. Header and Purch. Inv. Header tables.
You can always review various ledger entries that will be created in result of postings. Choose Preview Posting to validate document and inspect expected ledger entries.
When you post a purchase order for items, you can create both a receipt and an invoice. These can be done simultaneously or independently. You can also create a partial receipt and a partial invoice by completing the Qty. to Receive and Qty. to Invoice fields on the individual purchase order lines before you post. Note that you cannot create a purchase invoice from a purchase order for products or services that have not been received. That is, before you can invoice, you must have recorded a receipt, or you must choose to receive and invoice at the same time.
You can either post or post and print. If you choose to post and print, a report is printed when the order is posted. You can also choose the Post Batch action to post several orders at the same time. Learn more at Post Multiple Documents at the Same Time.
Viewing ledger entries
When the posting is completed, the posted purchase lines are removed from the order. A message tells you when the posting is completed. After this, you'll be able to see the posted entries in various pages, including the Vendor Ledger Entries, G/L Entries, Item Ledger Entries, Resource Ledger Entries, Purchase Receipts, and Posted Purchase Invoices pages.
In most cases, you can open ledger entries from the affected card or document. For example, on the Vendor Card page, choose the Entries action.
Editing ledger entries
You can edit certain fields on posted purchase documents, such as the Payment Reference field. Learn more at Edit Posted Documents. For more critical fields that affect the auditing trail, you must reverse or undo posting. Learn more at Reverse Journal Postings and Undo Receipts/Shipments.
See related Microsoft training.
See related Microsoft training
Purchase Items for a Sale
Prepare Drop Shipments
Setting Up Purchasing
Set Up Resources
Register New Vendors
Edit Posted Documents
Post Multiple Documents at the Same Time
Posting Documents and Journals
Correct or Cancel Unpaid Purchase Invoices
Finding Pages and Information with Tell Me
Work with Business Central
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