Purchase Cycles
Three paths from intent to payment — choose the right cycle for every purchase.
Every purchase follows one of three cycles. The correct cycle depends on whether goods are involved, whether you need a formal order first, and how quickly the transaction closes. Choosing the right cycle is not just process preference — it determines which documents exist, when AP is created, and how well your books reflect reality.
The Three Cycles
| Cycle | Path | Best For |
|---|---|---|
| Quick Expense | Expense (paid or on credit) | Small ad-hoc costs — staff reimbursements, taxi fares, petty cash |
| Standard Procurement | PO → GRN → Bill → Payment voucher | Inventory purchases, large capital spend, any purchase you want to check three ways before paying |
| Direct Bill | Bill → Payment voucher | Service invoices, recurring costs, vendor invoices with no prior order or delivery note |
Cycle 1: Quick Expense
Used when a cost is incurred and paid in the same moment. With Payment Status Paid, no AP is created — the debit goes to the category's expense account and the credit to the bank or cash account you chose. With Unpaid, the credit goes to Accounts Payable instead.
Journal (Quick Expense — 500 office supplies, Paid from petty cash):
DR Office Supplies 500 — CR Petty cash 500
Navigate to: Procurement → Expenses → New. Choose Paid and the payment account, add a line with the category and amount, Save. Done.
Cycle 2: Standard Procurement
The full four-step cycle for purchases that involve physical goods, require a formal order, or need three-way matching before payment is approved.
A PO is raised. It documents what is being ordered, at what price, from which vendor. No journal posts. Stock is not affected. The PO is Open.
Goods physically arrive. The warehouse team converts the PO to a GRN, recording the quantities actually received. Stock on hand rises at once. No journal posts. The GRN is Open; the PO becomes Partly fulfilled or Fulfilled.
The vendor's invoice arrives. The GRN is converted to a bill. On save: DR Inventory asset (or expense), DR Purchases tax, CR Accounts Payable. The GRN becomes Matched.
The bill is paid. DR Accounts Payable, CR Bank / Cash. If WHT applies, the credit is split between the bank and the WHT account.
Journal Pattern — Cycle 2 in Full
| Step | Document | Debit | Credit | Purpose |
|---|---|---|---|---|
| 1 | Purchase Order | — | — | No journal. Commitment recorded only. |
| 2 | GRN | — | — | No journal. Stock on hand +quantity. |
| 3 | Bill | Inventory asset 10,000 | Accounts Payable 10,000 | Invoice received. Cost and AP recorded. |
| 4 | Payment voucher | Accounts Payable 10,000 | Bank 10,000 | Cash paid. Obligation settled. |
Purchase tax is recorded at Step 3 (Bill). If the bill includes 7.5% tax on 10,000, the entry becomes: DR Inventory asset 10,000, DR Purchases tax 750, CR Accounts Payable 10,750.
Cycle 3: Direct Bill
Used when there is no prior PO and no GRN. The vendor sends an invoice, you record it as a bill, and pay it. Most service purchases follow this cycle: monthly rent, utilities, consulting fees, maintenance contracts.
The vendor's invoice is recorded as a bill. On save: DR Purchases or the item's expense account (Inventory asset for stock items — and stock on hand rises), CR Accounts Payable.
The bill is paid. DR Accounts Payable, CR Bank / Cash. The obligation is settled.
Choosing the Right Cycle
| Situation | Correct Cycle |
|---|---|
| Buying inventory for resale or production — goods physically arrive before invoice | Standard Procurement (Cycle 2) |
| Buying inventory — vendor bills immediately on delivery, no separate receiving process | Direct Bill (Cycle 3) |
| Monthly rent, utilities, professional fees | Direct Bill (Cycle 3) |
| Staff expense reimbursement, petty cash spend | Quick Expense (Cycle 1) |
| Capital equipment purchase requiring approval before commitment | Standard Procurement (Cycle 2) |
| Subscription software — vendor bills monthly with no physical delivery | Direct Bill (Cycle 3) or Recurring Bill |
The cycle determines your audit trail. Standard Procurement leaves a three-document trail — PO, GRN, Bill — linked in each document's Lifecycle panel, proving what was ordered, what was received, and what was charged. If your business requires purchase authorization before spending, set up an approval workflow for Purchase Orders in Settings → Workflows and use Cycle 2.
Related
- The quickest cycle: Expenses.
- The fullest cycle, start to finish: Creating a purchase order → Billing a goods received note → Manual payment.
- The control the full cycle buys you: Three-way match.
- What each document posts: Purchases overview.