Step 5 Approval of Purchase Orders
Just as requisition requests must be approved, so too must purchase orders. This scrutiny is to ensure the accuracy and legitimacy of requested items. Accepted purchase orders are then sent to suppliers.
Vendors have the ability to negotiate, approve or reject a purchase order. Once a vendor approves a purchase order, both buyer and supplier enter into a legally binding contract.
Step 6 Receipt of Goods
The vendor delivers the requested goods and the buyer examines them to see if they match the specifications in the purchase order. The goods and or services are then either approved or rejected.
Step 7 Supplier Performance
The vendor is evaluated by the buyer using a set of criteria such as contract compliance, quality of products/services, responsiveness, on-time delivery, and total cost of ownership. If the supplier defaulted this is also noted.
Step 8 Approval of Invoice
A goods receipt that has been approved is then sent to the finance team for clearance and payment. The invoice is verified for authenticity and no discrepancies. Invalid invoices are rejected and returned to the vendor for rectification.
Step 9 Payment of Suppliers
An approved invoice allows the finance team to release money and pay the vendor according to the terms in the approved invoice. There are several types of payments: holdback, final, installment, partial, or advance.
Procure to pay flow
Electronic invoices are issued, sent and received on a structured, standardized electronic format. Because of their structured format they are sent directly from the senders ERP system to the receivers ERP system. This greatly reduces the risk of human errors since the invoice does not have to be typed into the system by a person again. Electronic invoices are a cheaper, more environmentally friendly and time efficient alternative to paper invoices.