Describe the purchase order creation process
A purchase order (PO) is a legal agreement with a vendor to buy goods or services. You can use the PO document to keep track of product receipt status and the accounting of vendor invoices that the vendor bills toward the order.
You can open the purchase order from the Procurement and sourcing > Purchase orders > All purchase orders page. The PO landing page lists existing purchase orders.
Purchase order number is an autogenerated number, which can be configured by using the number sequence framework available in the finance and operations apps.
The vendor account and invoice account are usually the same. They might differ when an item is procured from a subsidiary company and the invoice the parent company sends the invoice.
The Purchase type field has three possible options:
Purchase order: When you create a PO with Purchase type as Purchase order, you can confirm the purchase order and proceed with other purchase activities, like receipt and invoicing.
Journal: Journal is a type of PO template. You can’t process a journal for confirmation, receipt, or invoice. You can convert the journal to a purchase order from the Procurement and sourcing > Purchase orders > Purchase journal > Post purchase journal page.
Returned order: You can use this option when you need to return a purchased item to the vendor. You can select the PO that you want to return and perform all following inventory and finance related steps from here.
When you create a PO, by default the value of the Approval status field is Approved if no workflow is associated to the PO.
You can navigate to the General tab of the Procurement and sourcing > Setup > Procurement and sourcing parameters page. Under the Change management for purchase orders section, change the value of Activate change management to Yes. You then see a new Workflow button displayed in the action pane when you create a new PO. The value of the Approval status field changes to Draft.
When you submit the PO to workflow, the status changes to In review. When the PO is approved by the workflow approver, the status changes to Approved.
The vendor associated to the PO may have vendor collaboration activated. In that case, the vendor can also review the PO before confirmation if the value of the Collaboration activation field is Active (PO is not auto-confirmed) on the General FastTab of the All vendors page. The value of the Approval status field changes to In external review. When the PO is confirmed by the vendor, the value of the Approval status field is changed to Confirmed.
The Purchase order status field depicts the stage of the purchase order. When you create and confirm the PO, the value would be Open order. When the item is delivered, the value of this field changes to Received. After posting the invoice, the value will change to Invoiced. If you cancel the PO, the value is changed to Canceled.
The PO detail page contains a PO header and a line section. In the header section, you can define information applicable for the entire PO, which includes ledger posting profile, sales tax, payment info, and total discount. In the line section, you can enter the item specific info, which includes storage and tracking dimensions, quantity, unit, and discounts. You can also define charges in both header and detail section.
The action pane of the Purchase order page has several menus and buttons under them.
The Purchase menu contains important features such as confirmation, prepayment, charges, discounts, sales tax, supplementary items, and account distribution. On the Receive menu, you can initiate different processes, including the receipt list, product receipt, and quality order. From the Invoice menu, you can match and post the invoice.
The purchase line includes menu buttons for features related to lines only. One important menu button is Purchase order line, where you can work with features such as delivery schedule, credit note, and BOM lines. On the Financials menu button, you find features such as account distribution, maintenance of line level charges, sales tax, and voyage cost. On the Inventory menu button, you can process reservations, check on-hand stock, and trace by dimension. For the explosion, you can use the Product and supply menu button. You can do the inventory registration from the Update line menu button.
When your PO is ready for processing, you can select the Confirm button in the Purchase action pane, which confirms the PO for further processing.
The previously described process is the manual creation of a PO. However, you can create the PO automatically by using other techniques.
- Once the requisition is approved, you can create a PO directly from it. On the purchase requisition page, select the Related information icon in the right pane of the page. The PO created from the purchase requisition is under the Related documents section.
You can create the PO from the Procurement and sourcing > Requests for quotations > All requests for quotations page. When you accept a quotation, you can activate the Purchase order option for that vendor from the action pane by selecting the Quotation > Replies > Manage replies button.
You can also create planned purchase orders from master planning. You can create the purchase order by firming the planned purchase orders.