Describe the procure-to-pay process
The procure-to-pay process is managed by the Procurement and sourcing module in Supply Chain Management. This process involves approving the purchase requisition, onboarding vendors, maintaining purchase orders, and confirming product receipts. The process ends after the processing of the purchase invoice. The following diagram illustrates the procure-to-pay process.
The major transactions in this process are as follows:
Purchase requisition
Request for quotation
Purchase order
Purchase receipt
Purchase invoice
Purchase requisition
The purchase requisition is an internal document that authorizes the purchase department to procure the product. In the usual process, the purchase requisition can be created by any employee of the organization. The purchase requisition must go through the workflow process, based on the workflow configuration defined. When approved, the purchase requisition can be referred to for further processing.
Request for quotation (RFQ)
Organizations issue RFQs when they want to receive competitive offers from vendors for the items or services they need to purchase. This process enables visibility to the quoting process, traceability, and better collaboration among vendors. In this process, vendors can provide product prices, delivery time, other incidental charges, and a discount as a part of the bid. The vendors enabled for vendor collaboration can directly put the bid in the vendor portal. The organization can accept the most suitable bid and proceed for further processing.
Purchase order
A purchase order is a document that represents an agreement between a company and a vendor to buy goods or services. A purchase order can be created directly from a purchase requisition when it's approved. You can also create a purchase order from the approved RFQ. You can create a new purchase order from the purchase order page as well.
A purchase order contains two main sections: Purchase header and Purchase lines.
A purchase header holds the PO number, date, vendor information, and other details applicable to the entire PO. Each PO can have one or more purchase lines. Purchase lines consist of item, unit of measurement, procured quantity, price, and other information related to each line. Information like discount, tax and delivery address is available in both the header and line.
When using the Purchase order preparation workspace in Supply Chain Management, you can set up a default order type for three types of purchase orders, as described in the following table.
| Purchase Order type | Description |
|---|---|
| Journal | You can use this type to create a draft order. This type doesn't affect stock quantities or generate inventory transactions. The purchase order journal lines aren't included in master scheduling. |
| Purchase order | You can use this type to create purchase orders when orders are confirmed with a vendor and are processed through receipt and invoicing before payment is made to the vendor. This type of purchase order is the most common. |
| Returned order (also RTV, Return to vendor) | You can use this type when you return goods to the vendor. This type of order requires that you specify the return material authorization (RMA) number that the vendor provides. You specify the RMA number on the General tab of the purchase order. The order lines must have negative quantities. |
Purchase orders include the following status fields that indicate the progress of an order: open order, received, invoiced, and canceled.
Purchase receipt
Product receipt is the process of recording that products that were ordered have been received. If the products go through preregistration, other steps must be performed before the products are received. The registration process ensures the storage and tracking dimension of the product before processing the receipt. In the usual scenario, the product is received when the Product receipt option is processed after the registration process is complete. In some situations, the products might go through other processes, such as quality management, before they're finally marked as Received.
Purchase invoice
When a purchase order is received, the purchase lines can be processed for invoicing. Invoicing a purchase order increases the open vendor balance and also increases the financial values of the inventory. It posts the transaction to the appropriate ledger book. Before you post the invoice, it must go through the invoice matching process to ensure consistency among vendor invoice, purchase order, and product receipt information.