This cycle is known internationally as purchase to pay. It shares its logic with the sales cycle in reverse: there we deliver and collect, here we receive and pay — and the same documents swap roles between the two businesses.
1 The links of the cycle
| # | Step | Document | Owner |
|---|---|---|---|
| 1 | The department’s request | An approved requisition | The requesting department |
| 2 | The award | Comparison and award minutes | Purchasing / the committee |
| 3 | The commitment | A purchase order sent to the supplier | Purchasing |
| 4 | Receipt | A goods receipt note by quantity | The warehouse |
| 5 | Inspection | An acceptance or rejection report | Quality / technical |
| 6 | Invoicing | The supplier’s invoice | The supplier |
| 7 | Matching | A three-way match | Accounts payable |
| 8 | Payment | A payment instruction and voucher | Treasury |
Buying with no purchase order
A manager calls a supplier directly, the goods arrive, and the invoice reaches accounting with no preceding document at all. At that point nobody can refuse it, because the goods have already been consumed. Measure the share of invoices with no purchase order — it is a direct gauge of how disciplined the cycle is, and every one of them is a price that was never negotiated.
2 The three-way match
Purchase order
What did we order, and at what price?
Receipt note
What actually arrived?
Invoice
What is the supplier charging us?
The decision
Match → pay · Discrepancy → hold
No payment until the three documents agree on both quantity and price
| Item | Purchase order | Receipt | Invoice |
|---|---|---|---|
| Quantity | 1,000 | 940 | 1,000 |
| Unit price | 45 | — | 47 |
| Total | 45,000 | — | 47,000 |
Two discrepancies: a quantity short by 60 units and a price higher by two riyals. The correct amount is 42,300 riyals, not 47,000 — a difference of 4,700 riyals on a single invoice.
The action: hold the invoice and request a credit note for the difference or a corrected invoice. Those who pay first and claim afterwards rarely recover.
Tolerance limits
A two-riyal difference on an invoice of a million is not worth holding payment and disrupting supply. Set a written tolerance — a small percentage or a fixed amount — approved automatically below it and escalated above it. Control without a tolerance turns into paralysis.
3 Receipt and inspection
- Quantity is counted, not taken from the supplier, however clear the shipping document is.
- Technical inspection may lag behind receipt, so goods are booked “received pending inspection”, not “accepted”.
- Partial rejection is documented with photographs and a report, and notified to the supplier in writing within a set period.
- Expiry date and batch number are recorded at receipt, not later.
- Partial receipt leaves the purchase order open for the balance, tracked until it is closed.
4 Payment and supplier performance
| Supplier performance measure | How it is measured |
|---|---|
| On-time delivery | Share of orders arriving by the promised date |
| Quantity accuracy | Share of orders matching on quantity |
| Quality of supply | Share rejected at inspection |
| Invoicing accuracy | Share of invoices that passed without a hold |
| Responsiveness | Time taken to answer requests and complaints |
Segregation of duties in the buying cycle
Whoever opens the supplier record does not approve the purchase order. Whoever issues the purchase order does not receive the goods. Whoever receives does not approve the payment. And whoever approves the payment does not sign the cheque alone. Combining any two of these in one pair of hands is the usual route to invoices from suppliers who do not exist.
Lesson summary
- The cycle has eight steps, each with its own document and a different owner.
- An invoice with no purchase order costs the business its right to refuse or negotiate.
- The three-way match compares what we ordered, what arrived and what we are charged.
- A written tolerance stops control from turning into paralysis.
- Quantity is counted, and technical inspection may lag, so goods are booked pending inspection.
- Measuring suppliers in numbers makes renewal a decision rather than a habit.
5 Test your understanding
Three quick questions
Pick the answer you believe is correct and you will see the result immediately.
1. The order is 1,000 units at 45, receipt is 940, and the invoice is 1,000 at 47. The correct amount:
You pay for what actually arrived at the contracted price: 940 × 45 = 42,300.
2. An invoice arrives for goods already consumed, with no purchase order. The most serious effect:
Once consumed, the price becomes a fait accompli — which is the core risk of buying outside the cycle.
3. The same employee opens the supplier record and approves payments. The main risk:
Combining creation of the payee with authorisation of payment is the best-known pattern in internal fraud.