The company in this guide
To keep the steps concrete, picture a US distribution business with about 200 employees across one head office and two warehouses. It has a finance team of five (a controller, two accounts payable specialists, a staff accountant and a financial analyst), no dedicated procurement department, and department heads in operations, IT, facilities, marketing and sales. Its accounting runs in QuickBooks Online or a similar system. It spends several hundred thousand dollars a month with outside suppliers, from pallets and forklift parts to laptops, software, printing and contractors.
The roles that appear below are:
- Requester. Anyone who needs something bought. In practice, most of the 200 people at some point.
- Budget owner. The department head responsible for a cost center or project.
- Buyer. Whoever places the order. In a company this size it is often an operations coordinator or office manager, not a full-time purchasing role.
- Receiver. The person who confirms delivery: a warehouse lead for goods, the requester for services.
- Accounts payable. Enters, matches and schedules invoices.
- Controller. Owns the rules, approves exceptions, closes the month.
The procure to pay process at a glance
| Step | What happens | Document produced | Main control |
|---|---|---|---|
| 1. Identify need | Requester decides something must be bought | None yet | Policy on what needs a request |
| 2. Purchase request | Requester submits item, amount, supplier, cost center | Purchase requisition | Budget check before approval |
| 3. Approval | Request is routed by amount and department | Approval record | Authority limits, segregation of duties |
| 4. Purchase order | Buyer issues PO to the supplier | Purchase order | Agreed price and terms on file |
| 5. Receiving | Goods or services are confirmed | Receipt | Proof that you got what you ordered |
| 6. Invoice | Supplier bills, AP captures the invoice | Invoice record | Correct supplier, correct PO reference |
| 7. Matching | Invoice compared with PO and receipt | Match result | No overpayment, no paying for undelivered goods |
| 8. Payment | Approved invoice paid on terms | Payment and remittance | Pay on time, not early, not twice |
| 9. Record and review | Entries synced, spend analyzed | Journal entries, reports | Clean close, spend visibility |
- 1. Identify need
- What happensRequester decides something must be boughtDocument producedNone yetMain controlPolicy on what needs a request
- 2. Purchase request
- What happensRequester submits item, amount, supplier, cost centerDocument producedPurchase requisitionMain controlBudget check before approval
- 3. Approval
- What happensRequest is routed by amount and departmentDocument producedApproval recordMain controlAuthority limits, segregation of duties
- 4. Purchase order
- What happensBuyer issues PO to the supplierDocument producedPurchase orderMain controlAgreed price and terms on file
- 5. Receiving
- What happensGoods or services are confirmedDocument producedReceiptMain controlProof that you got what you ordered
- 6. Invoice
- What happensSupplier bills, AP captures the invoiceDocument producedInvoice recordMain controlCorrect supplier, correct PO reference
- 7. Matching
- What happensInvoice compared with PO and receiptDocument producedMatch resultMain controlNo overpayment, no paying for undelivered goods
- 8. Payment
- What happensApproved invoice paid on termsDocument producedPayment and remittanceMain controlPay on time, not early, not twice
- 9. Record and review
- What happensEntries synced, spend analyzedDocument producedJournal entries, reportsMain controlClean close, spend visibility
Step 1 and 2: the need and the purchase request
The process starts with a person who needs something. The first control is simply a written rule on when a request is required. A common rule for a company this size: any purchase from an outside supplier above $1,000, any new supplier regardless of amount, and any commitment longer than one month.
The requester then fills in a purchase request (also called a purchase requisition). A useful request answers six questions:
- What exactly is needed, and how many.
- Estimated price, and the preferred supplier if known.
- Which department, project or GL account pays.
- When it is needed.
- Why, in one sentence, for anything unusual.
- Any quote or specification, attached rather than pasted into an email.
The single most useful thing software does at this point is show the remaining budget on the request itself. A facilities manager asking for $4,200 of shelving sees that the facilities budget has $5,100 left after open commitments. The approver sees the same number. The conversation about whether it fits happens before the order, not after the invoice. Our purchase requisition software page covers the request form in more detail.
Step 3: approval
The request is routed to the people who can approve that amount for that department. For a 200 person company, two or three levels are usually enough:
- Up to $2,500: the budget owner.
- $2,500 to $25,000: the budget owner, then the controller.
- Above $25,000: the budget owner, the controller, then the CFO or CEO.
Two additions make the rules sturdier. First, category rules: IT hardware and software always go through the IT lead for security and compatibility, whatever the amount. Second, segregation of duties: nobody approves their own request, and the person who approves a purchase is not the person who later approves the invoice for payment.
Approvals should happen where people already work. An approver who can approve from an email link or from Slack answers in minutes; one who has to log into another system answers on Friday. For the detailed design of thresholds and the matrix behind them, read purchase approval workflow.
Step 4: the purchase order
Once approved, the request becomes a purchase order. The buyer confirms the supplier, the price and the delivery date, and sends the PO. Good practice for this step:
- Generate the PO from the approved request so nothing is retyped. Retyping is where 45 becomes 54.
- Give it a unique number and tell the supplier to quote it on the invoice.
- Record payment terms on the PO, so AP later schedules the payment correctly.
- Count the PO as a commitment against the budget from the moment it is issued.
For recurring purchases from the same supplier, such as packaging materials, a blanket PO with an agreed price and a total cap saves dozens of individual orders a year. Each delivery draws down the blanket amount. See purchase order vs invoice for what a PO commits the company to and how it differs from the bill that follows.
Step 5: receiving
Receiving is the step most often skipped, and the one that makes the later match meaningful. When goods arrive at a warehouse, the warehouse lead records what arrived against the PO lines: 40 of 40 pallets of stretch film, or 18 of 20 laptops. When a service is performed, the requester confirms that the work was done, often a simple checkbox with a date.
Partial deliveries matter here. If only part of an order arrives, the receipt records only that part, and the PO stays open for the rest. The invoice is then matched against what was received, not against what was ordered.
Step 6 and 7: invoice capture and matching
The supplier sends an invoice, usually as a PDF to an accounts payable mailbox. Accounts payable captures it: supplier, invoice number, date, PO reference, lines and totals. Reading these fields automatically from the PDF saves most of the typing, but a person still reviews anything that does not match.
Then comes the match. For goods, three-way matching compares the invoice with the PO and the receipt. For simple services, two-way matching against the PO is often enough. Tolerance rules decide what counts as a match: for instance, a price difference within 2 percent or $75 per line, whichever is lower, passes, and anything above goes to the buyer.
For a worked example, the IT team ordered 20 laptops at $1,150. Eighteen arrived and were received. The invoice bills 20 at $1,150, $23,000 in total. The match flags a quantity exception: 18 received, 20 billed. AP approves $20,700 for the 18 units and holds the rest until the last two machines arrive, at which point the remaining $2,300 matches and is released. Three way match explained goes through tolerance rules and partial deliveries in detail.
Step 8: payment
Matched invoices are approved for payment and scheduled by due date. For a company with a few hundred invoices a month, a weekly or twice-weekly payment run is common. The controls here are simple and important:
- Pay on the due date, not early, unless there is an early-payment discount worth taking. A 2/10 net 30 term is roughly a 36 percent annualized return, so it usually is.
- Change supplier bank details only after a call-back to a known number, never on the strength of an email. Payment fraud through changed bank details is one of the most common attacks on accounts payable.
- Check for duplicates by supplier, invoice number and amount before the run.
Step 9: record, close and review
The last step closes the loop. Approved bills and payments flow into the accounting system with the GL account, department and class already set, so the staff accountant does not recode them. At month-end, goods received but not yet invoiced are accrued from the open receipts. Then the numbers turn into information: spend by supplier, by category, by department and against budget. This is where the controller spots that three departments each buy the same software on separate subscriptions, or that one supplier's prices have crept up over two quarters. Our spend analytics page shows the standard views.
How long the cycle should take
A healthy procure to pay cycle for a company this size has short, predictable waiting times. Rough targets many finance teams work toward:
| Stage | Target |
|---|---|
| Request to approval | Same day for amounts under $2,500, two business days above |
| Approval to PO sent | Within one business day |
| Invoice received to captured | Within two business days |
| Captured to matched | Same day for clean matches |
| Matched to paid | On the due date |
- Request to approval
- TargetSame day for amounts under $2,500, two business days above
- Approval to PO sent
- TargetWithin one business day
- Invoice received to captured
- TargetWithin two business days
- Captured to matched
- TargetSame day for clean matches
- Matched to paid
- TargetOn the due date
If requests sit for a week, people stop raising them and order on their own cards. Speed is part of control.
The gaps that break the process in practice
- Orders placed before approval. The supplier ships, the invoice arrives, and the request is created afterwards to make the paperwork fit. Fix it with a rule that invoices without a valid PO are returned, and make approval fast enough that nobody needs to skip it.
- No receipt for services. Without a confirmation, AP cannot tell whether a consultant's invoice covers work done. A one-click confirmation from the requester closes this.
- Budgets checked only at month-end. By then the money is spent. Commitments from open POs belong in the budget view.
- Spreadsheet PO logs. They work at 30 orders a month and fall apart at 300, especially when two people edit the same file.
- Two separate systems for purchasing and accounting. Every PO and bill typed twice is a chance for a mistake.