Netsuite

Procure to Pay Process in NetSuite: Detailed Guide and Overview

January 14, 2023

Table of contents

In NetSuite, the Procure to Pay process formalizes the steps that need to be taken for transactions with vendors. Like many business processes that require cross-departmental collaboration, Procure to Pay can benefit from more control and transparency.

By standardizing the process, businesses can make sure that each purchase from a vendor is recorded, approved, and paid for in the right way. This gets rid of bottlenecks and makes relationships with vendors better.

In this blog, we'll look at Procure to Pay in NetSuite, explore some of its advantages and benefits, and include a step-by-step guide for the process.

What is Procure to Pay in NetSuite?

The NetSuite Procure to Pay process keeps track of and manages your vendor orders over their entire lifecycle. Business transactions involve several steps, and Procure to Pay provides organizations with control and clarity to source, order, receive, and pay for goods and services.

With NetSuite's "Procure to Pay" feature, a business can speed up and automate the steps of a transaction. Planning and managing vendor processes effectively are essential. If you don't know where to start, ask our expert NetSuite consultants or keep reading.

What are the benefits of Procure to Pay in NetSuite?

NetSuite Procure to Pay provides organizations with visibility into vendor transactions. Each transaction involves several steps, which happen across various departments. A manual purchasing process has several points of failure, such as:

  • Documentation errors
  • Purchases made without approval
  • Payment delays
  • Receiving errors
  • Inefficient spending

Many of these problems are taken care of by Procure to Pay, which streamlines and automates transactions to make them go more smoothly. This process provides transparency and efficiency across the lifecycle of each vendor purchase.

The key benefits of Procure to Pay are:

Reduces procurement errors

Procurement errors cost money and time. By automating the processing of purchase orders (POs), invoicing, and payments, your business can avoid mistakes made by people and make sure it doesn't overpay or overorder.

Better financial oversight

Consolidating procurement, supply chain, and accounting data gives businesses accurate, real-time information about their spending.

Boost compliance

If you know more about your vendors and contracts, you can reduce risks and make sure payments are made on time.

Optimize procurement processes

Procure to Pay helps you integrate ERP, procurement applications, and supply chain planning. Optimizing these processes reduces delays and backlogs,

Scalability

Procure to Pay automates your business transactions, making it perfect for companies that are growing and need to deal with more customers and more complicated tasks.

Improve vendor relations

Automating your procurement means faster cycles and fewer payment delays, which help improve vendor relations considerably.

Critical features of Procure to Pay in NetSuite

Procure to Pay in NetSuite breaks down vendor transactions into critical steps that you can easily manage. Before we share our step-by-step guide to Procure to Pay in NetSuite, let's break down the six essential parts of the process. By understanding these concepts, the step-by-step guide will be easier to follow.

Purchase requisition

A purchase requisition is an internal document that asks for a certain good or service to be bought. The function of this document is to request internal permission or approval for your transaction.

Purchase requisition documents include information needed for a transaction, such as a description of the goods, the vendors, the quantity, the price, etc. It's worth noting that not every organization uses purchase requisitions as part of the procurement process.

Purchase order

Once the purchase requisition has been confirmed, a purchase order (PO) is sent to the vendor. A PO is an external document that includes details like item name or number, quantity, and so on. Basically, this document tells the vendor what they need to do to fulfill your order.

When both the buyer and the vendor approve a PO, it becomes a legal document.

Item Receipt

The item receipt document shows when your business received the order, how many items were received, and the time and date they arrived. This document is an important part of the process because you have to match it up with the PO in order to confirm the transaction.

Vendor or bill payment

Once the vendor approves the invoice, it is sent to the accounts payable or finance team. They check the contract terms and process the payment if everything is in order. This step also involves checking the details of the payment and taking steps to prevent accounts payable fraud.

Vendor return authorization

Not all vendor orders go smoothly. Sometimes, for a variety of reasons, you need to return an item. NetSuite's Procure to Pay process includes a Vendor Return Authorizations feature. Some of the details that should be included are:

  • Which items need to be returned
  • What quantity
  • Have the returns been approved
  • What is the item's current shipping status is
  • The value of refunds or credits from the vendor

Vendor credit

As we showed above, when items are returned, it creates vendor credit. There are other scenarios where vendor credit could also be applied, such as quality issues, loyalty awards, rebates, etc.

Procure to Pay's vendor credit is a helpful feature that lets credit be applied to payables accounts. This makes sure that money is used efficiently.

A step-by-step guide to Procure to Pay in NetSuite

NetSuite Procure to Pay is a multi-step process. Adhering to these steps and automating them where possible will boost your organization's procurement efficiency.

STEP 1: Create a vendor

The first step on the road to using Procure to Pay involves creating a vendor on the NetSuite system.

To achieve this, navigate to Lists > Relationship > Vendor > New

You'll need to fill in some mandatory information about the vendor, such as the company name. You can also fill out contact details, including address and website, and add any helpful comments about the vendor. Additionally, you can add contact details for people who work for this vendor, such as a sales representative or another key point of contact.

STEP 2: Create an item

After creating a vendor, you'll need to record the item you want to purchase.

To create your item, simply select Lists > Accounting > Items > New > Non-Inventory > Purchase

This step will bring up a form with several mandatory fields, such as:

  • Item name
  • Item number
  • Tax schedule
  • Vendor

If you give this item to a certain vendor, it will always be there when you choose it in the future.

STEP 3: Create vendor and item requisition

Next up, you must create a requisition. A requisition is a formal request for goods or services that is sent to the person, department, or division in your business that is in charge of buying.

Creating a requisition is straightforward. Select Transactions > Purchases > Enter Requisition > New

Mandatory information that needs to be included is:

  • Requestor's name
  • Date
  • Item required
  • Department

When you select "Submit," your requisition order will be listed as "Pending." To move to the next step, you must create an order requisition for that particular item.

Once the order requisition is made, a purchase order will be created. Select "OK" to change the status to "Started."

STEP 4: Entering a purchase order

Once the requisition is submitted, the purchase order is created automatically.

You can find the purchase order by selecting Transactions > Purchase > Enter Purchase Order > List

To populate the order with information, you need to select "Edit." Here you can enter details like:

  • Kind
  • Price
  • Quantity

Once you complete this step, a pending receipt will be generated.

STEP 5: Generate an item receipt

Once the item has been received from the vendor, you need to:

  1. Inspect the goods against the details on the purchase order
  2. Inspect them for any damages or other quality issues

Then, you must create a receipt and enter the information into NetSuite.

STEP 6 Create an invoice

Next up, the vendor will either send an invoice or include it with the items you have ordered. The invoice should include the following:

  • A detailed description of goods
  • Pricing information
  • Payment due date

All of this information must be reconciled against the purchase order and should be entered into the NetSuite system.

STEP 7: Settling payment with the vendor

The account payable process requires you to keep track of your transactions and pay your bills to vendors.

If everything is in order, your payment should be sent to the vendor.

STEP 8: Checking the general ledger

Once the payment has been sent, you can check it against the general ledger (GL).

Go to Bill Payment > Action > GL impact

This step will show you how your purchase has affected the overall general ledger and account balances.

How Seller Universe Ecommerce Group Can Help

Seller Universe Ecommerce Group is driven by a desire to help businesses improve their processes and become more efficient, productive, and, in the end, more profitable. Optimizing the Procure to Pay process in NetSuite is a fantastic way to keep invoicing costs down, drive visibility, and speed up procurement.

If your business needs support for improving internal processes through market-leading ERP software or assistance with business administration or consulting, get in touch today to start a conversation about how we can take your business to the next level.

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