NetSuite Procure to Pay Process

Not many organizations will cope without a robust purchasing system. The need to keep accurate data around external costs is one shared by most companies and the features, controls and efficiency of the purchasing process is something that will be closely studied when deciding to implement a new ERP system.

What is the NetSuite Procure to Pay Process?

The full extent of the purchasing process in NetSuite is referred to as Procure to Pay (P2P). This refers to all actions and transactions involved between procuring an item from an external party to paying for it. This is an oversimplified path really and in reality the NetSuite Procure to Pay process begins with setting up a new vendor in the system and creating the relevant item. From that point there are five key transactions that will make up the body of the purchasing process.

The process flow of standard records in NetSuite's P2P process

We will look here in more detail at these transactions to further explain the P2P process.

Key Transactions in the Procure to Pay Process

Purchase Requisition

A purchase requisition, or simply just requisition, is an internal transaction requesting permission to raise a cost. The requisition will normally be entered by someone from the wider business who is not responsible for raising purchase orders. The requisition does not require the accuracy of the externally facing purchase order but simply needs to give an indication of, for example, the estimated cost and the preferred vendor.

You may choose to apply an approval process to requisitions. This is especially advised if the employees raising requisitions are not regular NetSuite users and potentially more prone to an input error. This also ensures only the correctly approved costs are entered as purchase orders.

Using requisitions are a good way of keeping the system tidy and preventing any unapproved purchase requests being sent to suppliers.

Be aware that Purchase Requisitions come as part of the NetSuite Advanced Procurement module.

Purchase Order

The Purchase Order is an external transaction intended to communicate to the supplier the details of your purchase. As well as outlining the item specifics it will also display information about your shipping requirements, payment information and any further instructions. If you are not using purchase requisitions you may want to apply an approval process to the purchase order record. This will maintain the accuracy and suitability of information going to your vendors.

Although the requisitions are often raised by individuals from across the organization, the purchase order is normally generated by a more controlled group. This may be a purchasing or procurement department or in smaller companies a section of the finance team or accounts payable department may be responsible.

The purchase order is not a posting transaction but it is still in important metric within the business. Purchase order data allows the business to forecast incoming quantities of stock, stock valuations and unbilled costs.

You can learn more about the difference between requisitions and purchase orders in this NetFreak article.

Item Receipt

The item receipt is an internal record that a user posts to indicate that the goods or service have been received. This is most easily explained with physical items arriving at a warehouse. If a purchase order is raised for a quantity of 10 buckets, when a shipment of 5 buckets is physically received at the warehouse a user will post an item receipt for a quantity of 5 against the purchase order. This tells the system and relevant teams that we are happy to pay for 5 and we are still expecting a further 5.

Tracking of the '3 way match' on the face of a NetSuite Purchase Order record

You can choose to restrict the processing of vendor bills until a receipt is posted if that falls in line with your companies policies. The main benefit of this is that it prevents any bills being posted and potentially paid for items that were never physically received. This security measure also encourages users to maintain an accurate system and ensures prompt processing of item receipts.

Vendor Bill

At some point before or after the purchase is received the vendor is likely to send you a bill for their goods or service. The bill needs to be processed and entered in to NetSuite against the associated purchase order. This can be done manually or for high volume processing you may use optical character recognition software to ‘scan’ the documents in to NetSuite.

A vendor bill reduces the available quantity from a purchase order. A purchase order will have an open status until the total quantity has been billed. At this point it will have a fully billed status and no further bills can be posted.

Bill Payment

The last transaction that completes the P2P process is the bill payment. This is posted to account for the payment of the bill and removing the open balance from the vendors account. The timing of such payments can be managed by payment terms against the vendor record or the individual bill itself. The actual payment transaction can even be completed through NetSuite using the Electronic Bank Payments module.

As well as the above five transactions there are also additional records that are less regularly used. A vendor return authorization is needed when faulty or unwanted goods must be returned to the vendor and a vendor credit is posted when an amount is to be refunded form the vendor to your company.

The following video gives you an example of how some these transactions fit in to a real world procurement process –

Benefits of NetSuite’s P2P Process

  • A fully automated procurement and payment cycle, from the creation of purchase orders to the payment of vendor invoices.
  • Improved process efficiency for businesses seeking to streamline their operations.
  • Assistance in managing cash flow and optimizing financial operations.
  • Real-time visibility into the status of purchases, invoices, and payments.
  • Robust reporting capabilities and data insights.
  • One centralized system that consolidates all purchasing information in one place.

NetSuite’s P2P process really is a thorough and detailed framework to manage purchasing activities. All the transactions discussed here are customizable, subject to approval workflows or role based restrictions and linked for item and cost traceability. Setting this part of the system up well can drive major improvements in efficiency, provide plentiful data for better management and allow for smarter tracking of goods and costs. It is really important when designing your P2P process in NetSuite you take a broad, birds eye view of your current ways of working and look at refining those before pasting that in to your new system. Try to use as much of the standard NetSuite offering as possible. It is tried and tested and used effectively by thousands of customers worldwide.


If you are looking at moving your P2P process in to NetSuite avoid some common implementation mistakes we have pointed out here for you.

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