Purchase Order Process Flow Chart

The purchase order process flowchart outlines the steps an organization follows to request, approve, and receive goods or services from a supplier. This structured guide ensures all necessary approvals are obtained, thereby maintaining accuracy, accountability, and compliance. Below, we describe the phases involved in this process.

1. Requirement Identification

The process begins when a department identifies a need for goods or services. They compile a detailed list of requirements, including specifications, quantity, and any preferred suppliers.

2. Requisition Creation

Next, an internal purchase requisition is created. This document is essential and includes all the necessary information gathered in the previous step, ensuring potential suppliers understand exactly what is required.

3. Requisition Approval

The requisition then moves through an internal approval process. Stakeholders or department heads review and either approve or reject the requisition based on budget availability and necessity. This step ensures that all purchases are justified and authorized.

4. Purchase Order Creation

Once approved, the requisition becomes a formal purchase order (PO). The PO is a legally binding document sent to the chosen supplier, outlining the details of the goods or services required, pricing, terms, and delivery dates.

5. Supplier Confirmation

Upon receipt, the supplier reviews the purchase order details and confirms acceptance. They might also communicate any adjustments or constraints. Both parties must agree before proceeding.

6. Order Fulfillment and Delivery

The supplier then fulfills the order as per the agreed terms. Delivery details and shipping status are communicated to ensure the order reaches the right place at the right time.

7. Receipt and Inspection

Upon delivery, the receiving department inspects the goods to ensure they meet the specifications and are free from damage. This step is crucial for maintaining quality control and enabling the return of faulty items if necessary.

8. Invoice Approval and Payment

Once the goods are accepted, the supplier sends an invoice. The accounts payable department compares this invoice against the purchase order and the received items. Upon verification, payment is processed as per agreed terms.

9. Record Keeping

Finally, all documentation related to the purchase order, including approvals, delivery notes, and payment receipts, are archived. Proper record-keeping supports audit compliance and future reference.

The flowchart for a purchase order process helps streamline procurement activities, reduce errors, and foster transparent communication between departments and suppliers.