Purchase-to-Payment for Traders: From Purchase Order to Supplier Payment

What purchase-to-payment covers

For a trader, buying is where cost enters the business and where cash leaves it. The cycle starts with a need, such as stock running low, and ends when the supplier is paid and the GST on the bill is accounted for. Along the way, three different things happen at three different times: goods arrive, a bill arrives, and money goes out. A good process keeps them separate but connected.

The steps, in order

The cycle runs through the same stages each time, whatever the size of the order.

• Need: a product falls below its reorder level, or a customer order needs stock you do not have
• Purchase order: the order to the supplier, with products, quantities and rates
• Approval: someone reviews the order before it goes out
• Goods receipt: goods arrive and are received into a chosen warehouse
• Supplier bill: the bill is recorded with GST
• Payment: the supplier is paid against the bill
• Review: input tax credit is checked against your purchase records

Where purchasing usually breaks

The common failures are ordinary ones. Goods arrive without an order on file, a bill is entered before anyone confirms what was received, a rate on the bill differs from the rate agreed, and payments are made from memory of what is due. Each is small, but together they cause stock errors, cost errors and disputes with suppliers.

Connecting purchasing and inventory

The link between buying and stock is the goods receipt, not the bill. In TradeFlow, a goods receipt is raised against a purchase order and adds stock to the warehouse you choose, and the movement is kept in the stock history with the receipt that caused it. A purchase bill does not add stock. That separation is deliberate, because a bill can arrive days before or after the goods. If a receipt was entered by mistake, it can be cancelled with a reason, which reverses the stock it added.

Managing purchase orders and goods receipts

Orders often arrive in parts, so the system should show what is still outstanding. In TradeFlow, a purchase order moves from draft to pending approval to approved, and then to sent, partially received and received as goods come in. Approval is a built-in step on the order, and the system records who approved it and when. Each goods receipt is tied to its purchase order, so the outstanding quantity is always visible, and in-app notifications are raised for new orders, approvals and material received.

Watch the cost that goes into stock

Cost matters as much as quantity. In TradeFlow, when goods are received, stock is valued using the rate on the purchase order line, not the rate on the supplier bill. If the agreed price changes before the goods arrive, update the order first; a difference that appears only on the bill is worth resolving with the supplier and with your CA, because it will not automatically change the stock value.

Supplier bills and how to check them

A supplier bill should be checked against what was ordered and received before it is recorded. TradeFlow links a bill to its purchase order where there is one, and a bill can also be recorded without an order for direct purchases. The system does not compare the bill with the receipt for you, so make that comparison yourself: quantities, rates and GST. Once recorded, the bill posts to the ledgers and to the GST records, so input tax credit is captured at source.

Paying suppliers

Payments should be recorded against the bill they settle, so you can see what remains owed to each supplier. TradeFlow records supplier payments against purchase bills, moves the bill from unpaid to partially paid to paid, and posts each payment to the ledgers. The purchase dashboard shows open purchase orders, pending approvals, total spend and overdue bills, which gives you a weekly checklist. Where tax is deducted at source on a payment, TDS entries can be tracked in the finance module.

GST and input tax credit checks

Purchases are also where GST work begins. Each recorded bill feeds the GST records, and TradeFlow lets you reconcile purchase bills against GSTR-2B data, with each line shown as matched, missing in your books, missing in GSTR-2B or an amount mismatch. Purchases that fall under reverse charge can be flagged on the bill. TradeFlow prepares the return data; the returns themselves are filed outside TradeFlow, by you or your CA, and which credit you can claim is a question for your CA.

Controls worth having

A handful of habits keep the cycle reliable.

• No goods received without a purchase order, so every receipt has an owner
• Approval of every order before it goes to the supplier
• Separate permissions for the person who orders, the person who receives and the person who pays
• A monthly review of open orders and unpaid or unreconciled bills

Where TradeFlow fits

TradeFlow is built for Indian traders, wholesalers, distributors and dealers, and links purchase orders, goods receipts, supplier bills and payments to stock, the ledgers and GST data in one system. For the wider picture, read the guide to trading ERP modules, or see the page for traders.

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