Purchase Orders and Procurement

#Understanding Purchase Orders

A PO is a contractual commitment to buy from a vendor:

• Quantity and Price: What you're buying and at what price
• Delivery Terms: When goods/services will be delivered
• Payment Terms: When you'll pay
• GL Accounts: Which accounts to charge
• Approvals: Who must approve the spending

POs are optional in Light AP but recommended for spend control.

#Creating a Purchase Order

1. Navigate to Purchase Orders

2. Click Create PO

3. Enter PO details:

   • Vendor: Select or search
   • PO Number: Your internal PO identifier
   • PO Date: When PO was created
   • Required Date: When goods/services are needed
   • Delivery Address (optional)
   • Company Entity: Which entity is buying
   • Currency: PO currency

4. Click Next to add line items

#Adding PO Line Items

1. Click Add Line Item

2. Enter:

   • Description: What you're ordering
   • Quantity and Unit Price
   • GL Account: Which account to charge
   • Cost Center (optional): Department/project
   • Required Date: When this line is needed (optional)
   • Tax Category (optional)

3. Light calculates line total

4. Click Add

5. Repeat for additional items

#PO States and Workflow

POs progress through states:

• DRAFT: Created but not sent; no commitment
• APPROVED: Approved and sent to vendor
• RECEIVED: Goods/services partially or fully received
• BILLED: Matched to invoice
• CLOSED: Completed and archived

To change PO state:

1. Open the PO
2. Click Change Status
3. Select target state
4. Light validates transition
5. Click Confirm

#PO Approvals

Enforce approval before orders are committed:

1. Open the PO

2. Click Send for Approval

3. PO is routed to configured approvers:

   • Department Manager: Approves spending
   • Finance: Approves GL account coding
   • Procurement: Approves vendor terms

4. Each approver reviews and approves or rejects

5. Rejected POs return to creator for revision

6. Approved POs move to APPROVED state

Configure approval hierarchies in Settings > PO Approvals.

#Matching to Receipts and Bills

#Receipt Matching

When goods are received:

1. Open the PO

2. Click Receive Goods

3. Enter quantity received for each line

4. Set receipt date

5. Light shows:

   • Ordered quantity vs. received
   • Discrepancies if quantities don't match

6. Click Record Receipt

Receipt can be partial (multiple receipts for one PO).

#Three-Way Match

When a bill arrives, Light matches it to PO and receipt:

1. Create bill in AP

2. Link to PO (see Entering Bills article)

3. Light validates:

   • PO Quantity vs. Receipt Quantity: Match check
   • PO Price vs. Bill Price: Amount match check
   • PO Date vs. Bill Date: Timing check

4. If discrepancies:

   • Light flags them
   • Shows variances
   • You document reason and approve or reject

5. Matched bills are ready for approval and payment

#Controlling Spending with POs

#Spend Limits

Set maximum spending by vendor or category:

1. Open a vendor

2. Navigate to Spending Limits

3. Set:

   • Annual Spending Limit: Max per year
   • Monthly Limit: Max per month
   • Single Transaction Limit: Max per PO

4. Light warns when creating POs that approach limits

5. Prevents PO creation if limit exceeded (configurable)

#Budget Allocation

Reserve budget when PO is created:

1. Navigate to Settings > Budget Integration

2. Enable Reserve Budget for POs

3. When PO is approved:

   • Light reserves the PO amount from GL budget
   • Budget is committed (not yet spent)
   • Bill reduces reserved amount

4. This prevents overspending

#Blanket Purchase Orders

For recurring purchases from a vendor:

1. Create a Blanket PO with:

   • Total Contract Value: Max to spend
   • Multiple Deliveries: Over time
   • No Specific Quantities: Just total value limit

2. Subsequent purchases against blanket PO draw down the total

3. When amount is exhausted, PO is closed

4. Reduces administrative overhead for routine purchases

#Amendments and Changes

To modify an existing approved PO:

1. Open the PO

2. Click Amend PO

3. Make changes to:

   • Quantities
   • Prices
   • Delivery dates
   • Delivery address

4. Light recalculates totals

5. Amendment may require re-approval (depending on change type)

6. Click Submit Amendment

Original PO and amendment are linked for audit trail.

#Canceling POs

To cancel a PO:

1. Open the PO
2. Click Cancel
3. Provide reason (vendor unavailable, project cancelled, etc.)
4. If goods were already received, you're still liable for payment
5. Click Confirm Cancel

Cancelled POs remain in system for historical reference.

#Purchase Order Analytics

#Spend Analysis

1. Navigate to Reports > PO Spend Analysis

2. View:

   • Total spending by vendor
   • By GL account or cost center
   • By time period
   • By commodity (product category)

3. Identify top vendors

4. Analyze spending patterns

5. Export for analysis

#Vendor Performance

1. Navigate to Reports > Vendor Performance

2. View:

   • On-time delivery rate
   • Quality of goods/services
   • Price competitiveness
   • Responsiveness

3. Use to negotiate better terms or switch vendors

#Integration with Procurement

For organizations with formal procurement:

1. Light integrates with procurement workflows
2. Procurement team creates POs based on requisitions
3. POs feed into supplier management
4. Contracts track long-term vendor arrangements
5. Volume discounts are tracked and applied

#Related Articles

• Adding and managing vendors
• Entering and ingesting bills
• Bill approval workflows