Procure-to-pay in a small distributor: the steps from requisition to supplier payment
- The procure-to-pay process runs through seven steps, each passing control to the next on a specific document - losing any one document breaks the chain.
- Most small distributors lose money at two joins: when a requisition becomes a purchase order without carrying the approved specification forward, and when a GRN is missing or inaccurate at invoice matching.
- Every purchase order should be created directly from the approved requisition and carry a unique PO number, so discrepancies between what was authorized and what was ordered cannot open silently.
- Three-way matching - comparing the purchase order, goods received note, and supplier invoice before releasing payment - is the single highest-value control a small distributor can add to its P2P process.
- A first-pass invoice match rate above 90% signals a healthy P2P process; a rate below 70% points to inconsistent PO creation or GRN recording at the two problem joins.
The procure-to-pay process runs through seven linked steps, from purchase requisition to supplier payment. Most small distributors lose money not inside any single step, but at two specific joins - where a requisition becomes a purchase order, and where a goods received note is compared against a supplier invoice.
The procure-to-pay (P2P) process runs through seven linked steps: purchase requisition, requisition approval, purchase order creation, supplier acknowledgment, goods received note, invoice matching, and supplier payment. Each step hands off to the next on a named document - the approved requisition authorizes the purchase order, the purchase order instructs the supplier, the goods received note confirms what arrived, and a three-way match of purchase order, GRN, and invoice clears the payment. For a small distributor, the process is straightforward in outline. In practice, most overpayments, disputes, and delayed payments trace back not to individual steps going wrong, but to two specific joins: when a requisition becomes a purchase order without a verified spec, and when a goods received note is compared against a supplier invoice without a formal match.
The seven steps of the procure-to-pay process
The steps below describe a complete P2P cycle for a small distributor - the kind of business placing several dozen to several hundred supplier orders each month across a mix of repeat and new purchases.
Raise a purchase requisition
A purchase requisition is an internal request to buy specific goods from a specific supplier. It records what is needed, the quantity, the expected unit cost, which customer order or job it relates to, and who is requesting the purchase. For a distributor, the trigger is usually a confirmed customer order: you have agreed to supply 500 branded tote bags from a particular supplier by a specific date, and the requisition documents that intent before any external commitment is made. The requisition is not an order. It carries no legal weight with the supplier. Its purpose is to capture the purchase inside an internal approval process before money is committed. Every requisition should reference the customer order or job that triggered it. When a cost dispute arises three weeks later, that link is what allows you to trace the spend back to an authorized sale.
Review and approve the requisition
The requisition goes to an approver who checks whether the purchase is within budget, from a supplier on your approved list, and at an agreed or market-competitive price. For straightforward repeat purchases from known suppliers at pre-agreed rates, this step is quick. For new suppliers, unusual quantities, or orders above a value threshold, it requires more scrutiny. Approval thresholds - the value limits that determine who can authorize what - are central to this step. Without written thresholds, approval becomes a matter of individual judgment rather than policy, and larger purchases go out inconsistently reviewed. With thresholds set and enforced through your purchasing workflow, every order at every value level gets the right level of attention without unnecessary delays on routine purchases. Zigaflow's approvals feature allows you to set those thresholds by value and route each requisition to the correct approver automatically.
Create and issue the purchase order
Once the requisition is approved, it becomes a purchase order - a formal document sent to the supplier that commits your business to buying the specified goods at the stated price. The PO carries: supplier name and address, a unique PO number, line items with quantities and unit prices, the delivery address, a required delivery date, and your agreed payment terms. The PO number is important. It becomes the shared reference that links every subsequent document - the supplier's acknowledgment, their delivery note, and their invoice - back to this specific order. If your supplier's invoice carries a different reference, or no reference at all, the match will fail at Step 6 and someone will spend time on the phone resolving what should have been a trivial reconciliation. The PO should be created directly from the approved requisition, inheriting its quantities and prices, rather than re-keyed from memory.
Avoid verbal or unconfirmed orders
An emailed instruction to a supplier that carries no PO number is not a purchase order - it is a conversation. If quantities or prices shift in the email exchange, there is no agreed record to match the invoice against when it arrives.
Confirm the supplier's acknowledgment
Once the PO is sent, the supplier should return a formal acknowledgment confirming they accept the order on the stated terms: quantity, price, and delivery date. Many small distributors treat a brief email reply as sufficient, or skip this step entirely for repeat suppliers. That is a gap worth closing. If a supplier's acknowledgment states a different delivery date from the PO, or references a different unit price, that discrepancy needs to be resolved before the order is fulfilled - not after the goods arrive. For promotional merchandise distributors, where supplier lead times are tight and decoration work cannot start until stock lands, a delivery date discrepancy caught at acknowledgment stage can be rescheduled without affecting the customer. A discrepancy discovered at goods receipt - or worse, after the invoice arrives - cannot.
Receive goods and raise a goods received note
When the supplier's delivery arrives, the receiving process does two things: it confirms that what arrived matches what was ordered, and it creates a goods received note (GRN) that records the actual quantities received. The GRN is the most important document in the second half of the P2P process. Without a GRN, there is no verified record of what the supplier delivered. For each delivery, the person receiving goods should check: that the quantity received matches the PO quantity, that the item descriptions match the PO and the supplier's own delivery note, and that the condition of goods is acceptable. Any shortfall, surplus, or damaged items should be recorded on the GRN immediately. If a supplier delivers 480 units against a PO for 500, the GRN records 480 - not 500, not "roughly 500." That precision matters at the next step.
Partial deliveries need partial GRNs
If a supplier splits delivery across two shipments, raise a GRN for each. Do not wait for the full order to arrive before recording receipt. A partial GRN prevents the accounts payable team from matching an invoice for the full quantity when only part has arrived.
Match the invoice against the PO and GRN
Three-way matching compares three documents: the purchase order (what you agreed to buy and at what price), the goods received note (what actually arrived), and the supplier's invoice (what the supplier is asking to be paid). If all three agree on quantity, unit price, and total, the invoice clears for payment. If they disagree, the invoice is held and the discrepancy is investigated before payment is approved. When supplier invoices and purchase orders are tracked in the same system, this comparison is fast: does the invoice carry the PO number? Does the invoiced quantity match the GRN? Does the unit price match the agreed rate on the PO? Common mismatches include: the supplier invoiced for the full PO quantity when a partial delivery was made, the unit price differs from the agreed rate, or the invoice references a PO number that doesn't exist in the system. Each mismatch requires investigation, and repeated mismatches with the same supplier are a signal either that your PO process is inconsistent or that the supplier relationship needs a direct conversation.
Do not pay invoices without a PO reference
An invoice that arrives without a PO number has no approved purchase behind it. Paying it without investigation creates duplicate payment risk and removes the audit trail that connects the spend to an authorized order.
Approve payment and pay the supplier
Once the three-way match clears, the invoice moves to payment approval. For low-value matched invoices, approval may be automatic. For larger amounts, a named approver confirms sign-off. Approved invoices are then batched into a payment run - typically weekly or twice-monthly for small distributors - and paid on the agreed terms from the PO. Payment terms matter here. If you agreed net 30 days and your payment run falls on day 33, you are in late payment. For suppliers who offer early payment discounts, missing the window costs money. For suppliers whose terms include late payment provisions, consistent lateness adds cost and erodes the commercial relationship. The payment run schedule should be set to honor the terms on your most common PO type.
Where small distributors lose money: the two problem joins
The seven steps above work when every document flows cleanly from one to the next. In most small distributors running their P2P process across email, spreadsheets, and manual entry, two joins in that chain are where errors concentrate.
Join 1: Requisition to purchase order
The most common failure at this join is that the purchase order does not accurately reflect the requisition that authorized it. A buyer raises a requisition for 500 units at £4.20 each, the requisition is approved, and the buyer then creates a PO for 500 units at £4.00 each - the price from a previous order that was in their head rather than on screen. The supplier delivers at £4.20 and invoices at £4.20. The three-way match fails because the PO says £4.00, and someone has to investigate, contact the supplier, and resolve a discrepancy that should never have existed.
The same join also breaks when a buyer issues a PO without a requisition at all - a spot purchase made under time pressure. The goods arrive, the invoice arrives, and there is no approved requisition linking the spend to an authorized customer order. The invoice clears for payment, but the cost has no clear home in the job record.
The fix is a direct, system-linked handoff: the PO is created from the approved requisition, inheriting its quantities and prices, rather than being typed fresh. When that link is enforced by the software rather than by habit, the discrepancy between what was approved and what was ordered cannot open silently.
Join 2: GRN to supplier invoice
The second join fails when the goods received note does not exist, was raised for the wrong quantity, or was created days after the delivery rather than at the point of receipt. Research on distribution P2P processes identifies poor purchase order, receipt, and invoice alignment as one of the primary causes of chargebacks, disputes, and avoidable overpayment for distributors. The GRN is the control, and it only works when it accurately reflects what was received at the time of receipt.
A promotional merchandise distributor receives 480 units of a 500-unit order - a common scenario when a print run finishes slightly short or a supplier picks imprecisely. The supplier raises an invoice for 500 units. If the GRN records 480, the three-way match catches the discrepancy and the payment is held until the supplier issues a credit note for the 20-unit shortfall. If the GRN was never raised, or was raised hastily at 500, the invoice passes and the distributor overpays for goods it did not receive.
Building approval thresholds that work in a small business
Approval thresholds determine which purchases need sign-off and from whom. Set them too low and every small order creates a delay. Set them too high and larger purchases go out without meaningful review.
For a small distributor, a practical starting point is three value bands:
- Under £250: the buyer self-approves and issues the PO directly
- £250 to £1,500: the operations manager or purchasing lead approves before the PO is issued
- Over £1,500: a director or finance lead approves
These thresholds should be written down and enforced through your purchasing system rather than remembered individually. When the approval is built into the workflow - so a PO above the threshold cannot be issued without the named approver confirming it - the control works automatically rather than depending on everyone recalling the policy under time pressure.
The same logic applies to supplier invoice approval. A matched invoice that aligns with a pre-approved PO and a confirmed GRN requires minimal additional review - the approval happened earlier in the process. An invoice that arrives without a matching PO, or that doesn't reconcile with the GRN, should always require a named person to investigate and authorize before payment is released. Separating routine matched-invoice processing from exception handling is what prevents the exception from becoming the default.
What a complete P2P record looks like
A complete P2P record for a single order contains eight documents: the purchase requisition, the approval decision, the purchase order, the supplier's acknowledgment, the goods received note, the supplier's invoice, the three-way match result, and the payment confirmation or remittance advice.
A small distributor placing 80 supplier orders a month generates over 600 documents across those orders every month. When a supplier calls to query a payment, or a customer asks why a product cost more than quoted, finding the full chain quickly is the difference between a two-minute answer and a lengthy search through email archives and spreadsheet tabs.
The practical solution is to manage purchasing and supplier invoices in one system so the PO, GRN, and invoice are linked by the same reference number from the outset. That link is what makes the three-way match fast, what makes disputes resolvable without delay, and what gives a small business an audit trail that would satisfy a client's procurement team or an accountant reviewing the year's payables.
The P2P process is not about adding paperwork. Each of the seven steps exists to carry verified information forward so the next step can proceed on solid ground. The two joins where small distributors lose money are precisely the points where that information transfer breaks down - where someone types a number from memory instead of pulling it from an approved document, or where a delivery is accepted without the record that would validate the invoice. Closing those gaps is a process decision first: write the policy, set the thresholds, make GRN creation non-optional at goods receipt. The right system makes each of those decisions easier to enforce consistently, but the discipline has to exist before the software can reflect it.
Measuring whether the process is working
Three numbers tell a small distributor whether its P2P process is functioning well.
First-pass match rate: The percentage of supplier invoices that clear the three-way match on the first attempt, without requiring manual investigation. A high first-pass rate - above 90% for a well-run distributor - means your PO data, GRN data, and supplier invoicing are aligned. A rate below 70% means one of the three documents is consistently inaccurate, and the most likely cause is either inconsistent PO creation at Join 1 or inconsistent GRN recording at Join 2.
PO cycle time: The time from purchase requisition to issued purchase order. If this routinely takes more than 24 hours for standard purchases, your approval workflow is creating delays that affect delivery timelines downstream. The goal is not to remove approvals but to ensure they happen quickly for routine orders so that the process does not add lead time to orders that are already time-sensitive.
Invoice-to-payment days: The average number of days between a supplier invoice being received and payment being released. Where this exceeds your stated payment terms consistently, the cause is usually held invoices waiting for investigation rather than approved invoices waiting for a payment run. Reducing the number of held invoices - by improving the accuracy of POs and GRNs - is the most reliable way to improve this metric.
Sources
- Procure-to-Pay Process Flow: What Is It, How To Manage It, and Best PracticesPlanergy · accessed 2026-09-30
- The Procure-to-Pay Process in Distribution: Best Practices and Common PitfallsAcumatica · accessed 2026-09-30
- Procure-to-Pay (P2P): Definition, Process, and Key StepsMoss · accessed 2026-09-30