Procure to Pay Cycle
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Author |
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Name:
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haritha
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E-mail:
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haritha_gogineni@yahoo.com
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Procure to Pay cycle covers the following steps
1. Creating Requisition
2. Creating Purchase Order
3. Creating Receipt
4. Creating Invoice in AP
5. Paying the Invoice
6. Transfer, Import and Post to GL
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Overview:
In this article, we will see the steps involved in Procure to Pay Cycle.
Here is the diagrammatic representation:
1) Create Requisition:
Requisition is nothing but a formal request to buy something (like Inventory
material, office supplies etc) needed for the enterprise. Only an employee
can create one. There are two types of requisitions:
Internal Requisition:
Internal requisitions provide the mechanism for requesting and transferring
material from one inventory to other inventory.
Purchase requisition:
Unlike Internal requisitions, Purchase requisitions are used for requesting
material from suppliers.
Navigation:
Purchasing Vision Operations (USA) > Requisitions > Requisitions
Choose the requisition type and enter the Item, quantity, Price details in
the Lines tab.
In Source Details tab, specify the Buyer name.
Click the Distributions button. Enter the Charge Account.
Save the work. The status of the requisition will now be Incomplete. And now
the Approve button is highlighted. The requisition needs to be approved
first before proceeding further by the concerned authority. Submit this
requisition for Approval by clicking on the Approve button. The status will
now be updated to In Process .The workflow then will send an Approval
notification to the concerned person (derived based on hierarchy used
Position or Supervisor hierarchy) using which he can Approve or Reject the
requisition.
At any time the status of requisition can be checked using the Requisition
summary window.
Navigation:
Requisitions > Requisition Summary
Enter requisition number and click on the find button.
We can also check the Action History of requisition (it will show details
about who has submitted, approved and cancelled the requisitions) as below:
Navigation:
Tools menu > Action History.
Underlying Tables:
PO_REQUISITION_HEADERS_ALL
PO_REQUISITION_LINES_ALL
PO_REQ_DISTRIBUTIONS_ALL
2) Create Purchase Order:
There are 4 types of Purchase Orders:
1. Standard PO: A Standard PO is created for onetime purchase of various
items
2. Planned PO: A Planned PO is a longterm agreement committing to buy items
or services from a single source. You must specify tentative delivery
schedules and all details for goods or services that you want to buy,
including charge account, quantities, and estimated cost.
3. Blanket agreement: A Blanket PO is created when you know the detail of
the goods or services you plan to buy from a specific supplier in a period,
but you do not know the detail of your delivery schedules.
4. Contract agreement: Contract purchase agreements are created with your
suppliers to agree
on specific terms and conditions without indicating the goods and services
that you will be purchasing
Navigation for creating a standard PO:
Purchase Orders > Purchase Orders
Choose type as Standard Purchase Order. Enter the Supplier, Buyer. In the
Lines tab, specify the line number, line type, Item, quantity, price etc.
Click Terms to enter terms, conditions, and control information for purchase
orders.
Click Currency button to enter and change currency information for
purchase orders, RFQs, and quotations.
Click Shipments button to enter multiple shipments for standard and planned
purchase order lines Purchase order shipment specifies the quantity, shipto
organization and location, date you want your supplier to deliver the items
on a purchase order line, and country of origin for the items. When you
save, Purchasing creates distributions depending on the default information
available.
To enter more shipment information, select the More tab.
- Enter the Receipt Close Tolerance percent, Invoice Close Tolerance percent to set the receiving and
invoice close point.
- Select one of the following options for Match Approval Level:
TwoWay: Purchase order and invoice quantities must match within tolerance
before the corresponding invoice can be paid.
ThreeWay: Purchase order, receipt, and invoice quantities must match within
tolerance before the corresponding invoice can be paid.
FourWay: Purchase order, receipt, accepted, and invoice quantities must
match within tolerance before the corresponding invoice can be paid.
- Select an Invoice Match Option:
Purchase Order: Payables must match the invoice to the purchase order.
Receipt: Payables must match the invoice to the receipt.
Save the work.
Click the Receiving Controls button to enter receiving control information
for purchase orders.
- Enter the maximum acceptable number of Days Early and Days Late for
receipts.
- Enter the Action for receipt date control.
- Enter the maximum acceptable overreceipt Tolerance percent (receipts that
exceed the
quantity received tolerance).
- Enter the Action for Overreceipt Quantity.
- Select Allow Substitute Receipts to indicate that receivers can receive
substitute items in place
of ordered items.
- Enter the default Receipt Routing that you assign goods: Direct Delivery,
Inspection Required,
or Standard Receipt.
- Enter the Enforce Ship To location option to determine whether the
receiving location must be
the same as the shipto location.
Save the work.
Click Distributions button to enter distributions for the shipments.
Select more tab to enter more details and the requisition number (optional).
Save the work.
Click on the Approve button to initiate the Approval process.
Underlying Tables:
PO_HEADERS_ALL
PO_LINES_ALL
PO_DISTRIBUTIONS_ALL (REQ_HEADER_REFERENCE_NUM in Distributions table is the
Requisition number for this PO)
PO_LINE_LOCATIONS_ALL
3) Create Receipt:
Create a receipt to receive the items in the Purchase Order.
Navigation:
ReceivingReceipts
Enter the PO Number and select find button.
Go to Lines, check the lines you want to receive in the PO.
Click on Header button and Save which creates the receipt.
Receipt Tables are:
RCV_SHIPMENT_HEADERS
RCV_SHIPMENT_LINES (Lines Table has PO_HEADER_ID)
4) Create Invoice in Payables:
Once the goods are received, its time to pay the vendor for the goods
purchased and hence the invoices are created.
Navigation:
Payables, Vision Operations (USA) > InvoicesEntryInvoices
Enter type -- Standard, supplier information and amount.
Click the Match button to match to either Purchase Order or Receipt
(depending on the Invoice Match option specified on the PO) and avoid
manually entering the invoice.
Enter the PO Number you want match to and click Find.
Select the lines required and click on Match button.
Click on Distribute button to navigate to the Match to Purchase Order
Distributions window.
This creates the invoice and you can see the status of the invoice as Never
Validated. it has to be Validated and Accounted before you can pay it.
Validating the Invoice:
Click on Actions Button and Select Validate. Click on OK button.
Now you can see the status of the invoice as Validated, if there are no
issues during validation.
Create Accounting Entries:
Click on Actions Button and Select Create Accounting. Click on OK button.
Now we can see the Accounted status as Yes.
You can see the Accounting Entries here:
Tools View Accounting
Invoice Tables:
AP_INVOICES_ALL
AP_INVOICE_DISTRIBUTIONS_ALL
Accounting Entries Tables:
AP_ACCOUNTING_EVENTS_ALL
AP_AE_HEADERS_ALL
AP_AE_LINES_ALL
5) Making a Payment:
Go to the Invoice window and query the invoice you want to pay. You would
see Amount paid as 0.00 before you make a payment.
Click Actions button. Select Pay in full and click OK.
Select the Bank Account and Document. Save the Work.
Now that the payment is made, when you query for the invoice in Invoice
window, you will the Amount Paid as $4,000.00.
Create Accounting entries for payment.
Click Actions and select Create Accounting
Select the void checkbox to cancel the payment.
View Accounting Entries:
In the Payments window, query for the payment.
Tools menu View Accounting
Payment Tables:
AP_INVOICE_PAYMENTS_ALL
AP_PAYMENT_SCHEDULES_ALL
AP_CHECKS_ALL
AP_CHECK_FORMATS
AP_BANK_ACCOUNTS_ALL
AP_BANK_BRANCHES
AP_TERMS
You can also pay the invoices using Payment Batch screen. Refer to the
article Make AP Payments through Payment Batches
6) Transfer to General Ledger:
Navigation:
Payables Responsibility > View Requests
Run the concurrent program Payables Transfer to General Ledger with the
required parameters.
Journal Import:
Refer to the Article Order to Cash Cycle.
Posting:
Refer to the Article Order to Cash Cycle.
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faisal
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commented on
7/15/2009 7:24:19 AM
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Ram
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commented on
7/29/2009 6:06:36 AM
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Sudhakar
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commented on
7/29/2009 6:55:02 AM
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sid
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commented on
8/10/2009 9:11:34 PM
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Thanks for the help and effort. It did help me a lot. If possible can you post the flow for Order - WIP - GL
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Dilip Kumar
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commented on
8/21/2009 11:04:51 AM
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MIRZA
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commented on
8/27/2009 5:14:27 AM
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Hi
Its very very good and excellent.
Best Regards
Mirza Khan
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altaf
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commented on
8/31/2009 3:05:30 AM
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Manpreet Kaur
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commented on
9/9/2009 12:54:47 AM
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Manoj
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commented on
9/25/2009 2:53:36 AM
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Good Work., Helped alot.Keep posting..!
Can you please post Pricing module..like Credit memo,Debit memo
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alihadawe
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commented on
9/29/2009 4:52:07 AM
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I do really thank you for this nice document with snaps. I'm looking for full financial Cycle if you can submit such one will be also very kind of you ,
but this one is also nice, and you deserve to have excellent.
BR,
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manjunath
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commented on
10/3/2009 1:40:13 PM
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I have a done a great work with help of p2p,o2c flow.I learned all this cycles with the help of erp schools and the flow given by laksmi@erpschools.com..Thank u
From
Reddy
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Rehan
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commented on
10/13/2009 7:07:49 AM
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Superb! Very Good Article
Thank You So much
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Abhaya
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commented on
10/27/2009 8:53:29 AM
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Really this is a excelent document.
Keep it up.
Regards
Abhaya
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Abhaya
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commented on
10/27/2009 8:53:30 AM
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Really this is a excelent documents.
Keep it up.
Regards
Abhaya
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Abhaya
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commented on
10/27/2009 8:53:31 AM
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Really this is a excelent document.
Keep it up.
Regards
Abhaya
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Divya
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commented on
10/30/2009 5:01:17 AM
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sunny
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commented on
11/5/2009 2:11:55 AM
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exlent work. keep going
regards
sunny
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Munawar
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commented on
11/5/2009 2:49:19 AM
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Really this is a excelent document.
Keep it up.
Regards
Munawar
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FAIZAL
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commented on
12/3/2009 5:22:29 AM
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Absolutely amazing guide to learn P2P & O2C Cycle !Keep going on the same pace!I would like to have more on financials like this , If u got kindly update me!Expecting more from your vast knowledge!
Thanking LAXMI,
FAIZAL.K
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sonia
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commented on
12/20/2009 6:58:20 AM
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i do not have any world to admire you for this P2P document...excelent.
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