You create a purchase invoice or purchase order to record the cost of purchases and to track accounts payable. If you need to control an inventory, purchase invoices and purchase orders are also used to dynamically update inventory levels so that you can minimize your inventory costs and provide better customer service. The purchasing costs, including service expenses, and inventory values that result from posting purchase invoices or orders contribute to profit figures and other financial KPIs on your Role Center.
In addition to buying physical items (Inventory item type), which affect inventory valuation, you can purchase services represented by time units. You can do this either with the Service item type or with the Resource line type.
You must use purchase orders if your purchasing process requires that you record partial receipts of an order quantity, for example, because the full quantity was not available at the vendor. If you sell items by delivering directly from your vendor to your customer, as a drop shipment, then you must also use purchase orders. For more information, see Make Drop Shipments. In all other aspects, purchase orders work the same way as purchase invoices. The following procedure is based on a purchase invoice. The steps are similar for a purchase order.
When you receive the inventory items or when the purchased service is completed, you post the purchase invoice or order to update inventory and financial records and to activate payment to the vendor according to the payment terms. For more information, see Posting Purchases and Making Payments.
Do not post a purchase invoice physical items until you receive the items and know the final cost of the purchase, including any additional charges. Otherwise, your inventory value and profit figures may be skewed.
You can easily correct or cancel a posted purchase invoice before you pay the vendor. This is useful if you want to correct a typing mistake or if you want to change the purchase early in the order process. For more information, see Correct or Cancel Unpaid Purchase Invoices. If you have already paid for items or services on the posted purchase invoice, then you must create a purchase credit memo to reverse the purchase. For more information, see Process Purchase Returns or Cancellations.
The item card can be of type Inventory, Service, and Non-Inventory to specify if the item is a physical inventory unit, a labor time unit, or a physical unit that is not kept on inventory. For more information, see Register New Items. The purchase invoice process is the same for all three item types.
With the Resource purchase line type, you can also purchase external resources, for example, to invoice a vendor for work delivered. For more information, see Set Up Resources.
To use a purchased resource, you may need to set the resource's capacity and manually assign it to a job. Purchasing a resource will create a resource ledger entry, however, resource ledger entries are not tracked for quantity and value as, for example, items are. If quantity and value tracking is required, then consider using other line item types.
You can fill vendor fields on the purchase invoice in two ways depending on whether the vendor is already registered.
To create a purchase invoice
The following describes how to create a purchase invoice. The steps are similar for a purchase order. The main difference is that purchase orders have additional fields and actions for physical handling of items.
Choose the icon, enter Purchase Invoices, and then choose the related link.
In the Vendor field, enter the name of an existing vendor.
Other fields on the Purchase Invoice page are now filled with the standard information of the selected vendor. If the vendor is not registered, then follow these steps:
In the Vendor field, enter the name of the new vendor.
In the dialog box about registering the new vendor, choose the Yes button.
On the Select a template for a new vendor page, choose a template to base the new vendor card on, and then choose the OK button.
A new vendor card opens, prefilled with the information on the selected vendor template. The Name field is prefilled with the new vendor's name that you entered on the purchase invoice.
Proceed to fill in the remaining fields on the vendor card. For more information, see Register New Vendors.
When you have completed the vendor card, choose the OK button to return to the Purchase Invoice page.
Several fields on the Purchase Invoice page are filled with information that you specified on the new vendor card.
Fill in the remaining fields on the Purchase Invoice page as necessary. Hover over a field to read a short description.
You are now ready to fill in the purchase invoice lines with items or resources that you have purchased from the vendor.
If you have set up recurring purchase lines for the vendor, such as a monthly replenishment order, then you can insert these lines on the invoice by choosing the Get Recurring Purchase Lines action.
On the Lines FastTab, in the Item No. field, enter the number of an inventory item or service.
In the Quantity field, enter the number of items to be purchased.
For items of type Service and for lines of type Resource, the quantity is a time unit, such as hours, as indicated in the Unit of Measure Code field on the line.
The Line Amount field is updated to show the value in the Direct Unit Cost field multiplied by the value in the Quantity field.
The price and line amount are shown with or without sales tax depending on what you selected in the Prices Including Tax field on the vendor card.
The totals fields under the lines are automatically updated as you create or modify lines to display the amounts that will be posted to the ledgers.
In rare cases, the posted amounts may deviate from what is displayed in the totals fields. This is typically due to rounding calculations in relation to VAT or sales tax.
To check the amounts that will actually be posted, you can use the Statistics page, which takes into account the rounding calculations. Also, if you choose the Release action, the totals fields will be updated to include rounding calculations.
In the Invoice Discount Amount field, enter an amount that should be deducted from the value shown in the Total Incl. Tax field at the bottom of the invoice.
If you have set up invoice discounts for the vendor, then the specified percentage value is automatically inserted in the Vendor Invoice Discount % field if the criteria are met, and the related amount is inserted in the Invoice Discount Amount field.
When you receive the purchased items or services, choose Post.
The purchase is now reflected in inventory, resource ledgers, and financial records, and the vendor payment is activated. The purchase invoice is removed from the list of purchase invoices and replaced with a new document in the list of posted purchase invoices.