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Sap Software Purchasing and Procurement

Procurement Process Accounts Payable

Procurement Process Cycle | Procure to Pay process

Procurement Process (Procure to Pay process):
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Procurement Process Cycle

Procure to pay Process consists the following processes.

1. Material requirement planning

2. Vendor Selection
3. Request for Quotation
4. Purchase Requisition
5. Purchase Order
6. Goods Receipt
7. Goods Receipt Invoice
8. Invoice Verification
9. Payment to Vendors
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Procurement Process Purchasing and Procurement

Manufacturing and Production The Finance and Accounting

1. Material requirement planning (MRP) :-

Materials requirements planning (MRP) refers to the technique of using a projected manufacturing
production schedule to figure out what supplied materials you will need, and when you will need
them. Materials requirements planning (MRP) type controls the MRP procedure, pricing, material
valuation. Material requirement planning carried out by MRP controller in production department.

2. Vendor selection :-

Vendor selection is one of the important step in procurement process. With the help of obtained
quotations from sources and by comparing them, vendors are selected

3. Request for Quotation :-

Requesting potential vendors to submit a quotation for a material or services. Quatation contains the
vendor’s terms and conditions and constitutes the basis for vendor selection

4. Purchase Requisition :-

A purchase requisition is an internal request to purchasing. You ask the buyer to provide a certain
quantity of a material or service on a certain date.A purchase requisition can be created automatically by
Material Requirement Planning (MRP) or manually created. PR converts to RFQ, PO or outline
agreement. Purchase Requisition forms include the following information

◾ Material Qty, description of goods & service and total value.

◾ Department Account number.
◾ Signature by an Authorized Department.
◾ Attached Quote from the vendor.
◾ Delivery instructions.
◾ Attach Quote from the suggested vendor.

5. Purchase Order :-

Purchase Order (PO) is a formal request to a vendor to supply certain materials or services under the
certain conditions. A Purchase Order (PO) can be created with reference, or without reference to a
purchase requisition, a request for quotation, or another purchase order.

POs usually specify terms of payment, incoterms, delivery date, specifications, material qty,
price and reference or part numbers.
Types of purchase orders in procurement process:- Standard PO, Planned PO, Contract PO.

6. Goods Receipt :-

Goods Receipts (GR) is created to reflect the Goods Receipts for the specified material ordered from a
vendor using Purchase Order process. After receiving the goods the company can record the following
information, this information can be used for accounting, stock check and rotation, to return any goods if
there is a problem
◾ What goods were delivered,
◾ Which vendor delivered the goods.
◾ Who, how, when goods were delivered and received the goods.

7. Goods Receipt Invoice (GRIN) :-

Goods receipt Invoice process is one of the important process in procurement process cycle. It is
matching the goods that a company receives with the company PO (purchase order). It involves checking
the goods are not damaged and fit for use, verifying the price, quantity, payment terms. Goods movement
are entered in to the system with reference of Purchase order and goods receipt material documents are
posted, automatically appropriate general ledgers are posted and stock accounts are updated.

8. Invoice Verification :-

After GRIN process, next process of procurement to pay is invoice verification. It plays an important
role in procurement process and Materials Management Module which performs the following tasks

◾ A Vendor Invoice can be created with reference to a Purchase Order, a Goods Receipt, a Delivery
Note..
◾ Invoice is verified in-terms of prices, quantity,
◾ Necessary approvals by project managers

After verifying all the data, the invoice is posted and the data is saved in the system. The system updates
the invoice data in Materials Management and Financial Accounting.

9. Payment to Vendors:-
The last step in procurement process cycle is payment to vendors and it is also known procure to pay
process. Vendors are get paid as per payment terms. In this fast technology world, comanies can pay
through many methods to vendors. For example – through Net banking,Check payment etc
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