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Purchase Order Flow – Approve Payment

Approve payment requires a three-way match between the purchase order, the receiving report and the invoice from the supplier. Items including price, quantity and delivery date must match. The purchase will disburse payment that could include electronic funds transfer (EFT). Any discrepancies including quality concerns must be addressed before payment is issued.

Procure-to-Pay Cycle

The procure-to-pay cycle includes the activities from the time the purchase order is placed until payment is made. As defined here, the cycle differs from the purchase order flow in that it does not include the time and activities to generate the requisition or prepare the PO before issuing it to the supplier. Although the exact definition may differ from company to company, most organizations are seeking continuous improvement methods to improve the cycle.

Cash-to-Cash Cycle Time

The cash-to-cash cycle time is also concerned a key measurement for many companies, particularly those holding inventory. This measures the time from when a supplier is paid to when the business is paid from customers. The goal is to improve the cycle time that may be accomplished by extended payment terms with suppliers or having inventory on consignment and shorten payment terms with customers while considering relationships, ability to negotiate and suppliers and customers have similar cash-to-cash cycle time goals as well.

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