What is P2P Cycle ?

P2P Cycle

Create Requisition: The requisition is nothing but a formal request to buy something (like Inventory material, office supplies etc.) needed for the enterprise. Only an employee can create one. 

There are two types of requisitions: 

Internal Requisition: Internal requisitions provide the mechanism for requesting and transferring material from one inventory to another inventory. 

 Purchase requisition: Unlike Internal requisitions, Purchase requisitions are used for requesting material from suppliers. Create Purchase Order: 

 There are 4 types of Purchase Orders: 

1. Standard PO: A Standard PO is created for one–time purchase of various items.

2. Planned PO: A Planned PO is a long–term agreement committing to buy items or services from a single source. You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities, and estimated cost. 

3. Blanket agreement: A Blanket PO is created when you know the detail of the goods or services you plan to buy from a specific supplier in a period, but you do not know the detail of your delivery schedules. 

4. Contract agreement: Contract purchase agreements are created with your suppliers to agree on specific terms and conditions without indicating the goods and services that you will be purchasing. 

Types Of PO In Short :

STANDARD PO - ONE TIME PO 

PLANNED - LONG TERM AGREEMENT WITH SINGLE VENDOR - TENTATIVE SCHEDULES ON DELIVERY 

BLANKET - SPECIFIC SUPPLIER, NO DETAILS ON DELIVERY 

CONTRACT - AGREEMENT WITH SUPPLIER, WITHOUT KNOWING GOODS 

 Create Receipt: Create a receipt to receive the items in the Purchase Order. Create an Invoice in Payables: Once the goods are received, it’s time to pay the vendor for the goods purchased and hence the invoices are created. Making a Payment: Transfer to General Ledger: