Research Prices and Product Availability

The process begins by identifying the need for specific items. This step involves researching prices and availability from various suppliers to ensure the company gets the best deal while also meeting its inventory or service needs.

Select Supplier and Send Purchase Order

After finding the best price and availability, the company selects a supplier and sends a purchase order. This document formalizes the purchase agreement and includes essential details such as the quantity, price, and delivery terms.

Receive Items and Record Purchase

Once the ordered items are received, the company records the purchase in its system. This step triggers the creation of an accounts payable entry, documenting the obligation to pay the supplier. It also updates the company's inventory or asset records.

Pay Supplier

The final step involves paying the supplier according to the agreed-upon credit terms. Companies often try to take advantage of early payment discounts, if available, to reduce costs. Payment completes the purchase and payment process, ensuring the supplier is compensated for the goods or services provided.