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Purchase Order Flow – Approve Payment

In order to approve payment, a three-way match must be made between the purchase order, the receiving report, and the supplier’s invoice. This includes ensuring that the price, quantity, and delivery date of the items match. Payment may be disbursed through electronic funds transfer (EFT). Any discrepancies or concerns regarding quality must be addressed prior to issuing payment.

Procure-to-Pay Cycle

The procure-to-pay cycle refers to the various activities involved in the process of purchasing, starting from the placement of the purchase order until the payment is made. It’s important to note that this cycle excludes the time and activities required to create the requisition or prepare the PO before sending it to the supplier. While the definition may vary depending on the company, most organizations aim to implement continuous improvement methods to enhance this cycle.

Cash-to-Cash Cycle Time

For businesses that hold inventory, the cash-to-cash cycle time is a crucial metric. It tracks the time between paying suppliers and receiving payment from customers. The aim is to reduce this cycle time, which can be achieved by negotiating extended payment terms with suppliers, holding inventory on consignment, and shortening payment terms with customers. It’s important to consider the relationships with suppliers and customers and ensure that everyone has similar goals for cash-to-cash cycle time.

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