In this video we take a look at purchases which are the first part of the procure to pay cycle, and how you generally get merchandise, equipment, and other goods into your company and onto your company’s books. We talk about what purchases are, then go over creating a purchase order. We cover drop ship purchase orders and when you would use them, and we talk about purchase order approval workflows. We cover receiving items using the item receipt form, and cover an alternate purchasing flow that uses purchase requisitions. Finally we cover vendor returns.

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Back to: NetSuite Usage Basics > Chapter 4 - Transactions


Purchases in NetSuite cover almost everything you buy for your business, they are the first half of what is referred to as Procure to Pay. We’ll take a look at them in this video. Items are anything that you buy for your business that you want NetSuite to keep track of, and purchasing is the activity that keeps track of these items in the system. This could be inventory you are planning to sell, or components that you will eventually assemble into finished goods to be sold. Items can also be things like electricity, telephone, and other business services, and even the computers you use NetSuite on. We’ll talk more about Items in the next chapter, but for now, all you need to really understand is that an item is the actual thing, like a computer or a television. A purchase is the action of adding the items to your balance sheet. When you buy things in NetSuite it is generally done using the Purchase Order. Just as you might send a purchase order to a vendor asking for fifteen new widgets, you would create a purchase order in NetSuite to reflect this. Most companies use the purchase order they generate in NetSuite to send to the vendor. Let’s take a look at creating a purchase order inside the system. First we’ll go to Transactions, Purchases and click Enter Purchase Orders. This takes us to the purchase order entry screen. The first thing we need to do is select a vendor. I’ll select Guru Education Inc. by typing in the vendor field. Not all vendors sell all items, and NetSuite is smart enough to keep track of what vendors sell and what they don’t; provided you set it up that way. For this reason, the vendor should always be selected first. In fact, in most cases you really can’t select an item without choosing a vendor first anyway. I can add as much information in this top header section as I want, but I only have to enter the information that has an asterisk next to it, indicating that it is mandatory. Since this is for me, I will select myself in the employee field. We can see that some of these fields are also filled in automatically for us. The PO number for example is usually automatically generated based on the last PO number that was used. I’ll go ahead and skip down here and enter the item next. If I click on the double downward facing arrows and choose list, I get a list of all the products I could pick. This does not mean that this vendor sells all of these items, but that the items were setup without vendor restrictions in place. I’ll type NetSuite in the search box and click search and I get just two results. I’ll go ahead and choose this NetSuite basics course. Had I chosen any other vendor in the system this course would not have shown up because of how the item is configured. I will change the quantity to two, because I might actually want a co-worker to have access to this course as well. Now, I’ll click add. I can see my rate as $100, and my amount as $200, since I am buying two of these. At the top I can also see my total for this purchase order is $200. If I wanted to add another item I could do that below, but I only want this specific course right now. I could click save here, and this really is all there is to creating a purchase order, but I want to call your attention to some other information that is useful. First are the department, class, and location fields. These are present on almost every transaction form, and we talked about these in the transactions overview video just before this one. Since this is the first time we have seen them in action I want to call special attention to them. If there is a department, class and location this item is being ordered for, I would strongly encourage you to enter this information. This is used later to segment, or dimensionalize, reports, and the tiny bit of extra effort on the front end, pays dividends later. I’ll go ahead and select Admin for the department, and Services for the class since this is a service. Since I don’t really have any locations setup for this I will leave location blank, though I could enter one by clicking New or selecting this plus icon. The second field I want to call your attention to is the Memo field. Most people think of NetSuite as an accounting system, but that is a very limiting definition. In an earlier video at the start of this course I referred to NetSuite as a communication tool, and that is very much what it is. This memo field allows you to effectively use it that way, by providing information to other employees who may review this record later. I’ll go ahead and put something like “Bob and I are going to review these courses to see if they would be of any value to our employees.” The last field I want to call your attention to is the Custom Form select box. If I click here I can select a few different forms that I could use, and most of these just control the layout of fields, or what fields are required. You might use a different form to make purchasing a little more streamlined for certain departments, for example. There are two particular forms that are worth mentioning though, and they are the drop ship forms. A drop ship is a special type of purchase order, that you can fill out to order goods from a vendor, but have them shipped directly to a customer, or other third party. So if you need to do this with a purchase order, that is the form you would use. But since I am ordering this for myself, I’ll go ahead and use the standard form. I do have other tabs down here where I can do things like add a vendor message, or override the default vendor terms. I don’t really have any other information I need to fill out right now though, so I will not go through them. I’ll go ahead and click Save, and the Purchase Order is now put in an, Approved Pending Receipt, status which I can see up here. I am an administrator, and my instance of NetSuite is setup to auto approve everything that I enter. Your instance may not be setup this way, and there could be a lot of variation in the approval process. Right now we’ll finish this purchase order, and then we will come back and take a look at how an approval might work in a typical setup. Once I have the order, that is whatever product I ordered has been received, the PO should then be received. This is done by clicking this blue Receive button, and this creates an Item Receipt. Assuming that you got the item and everything is fine, then Item receipts are very simple. Usually all you need to do is click save, so I’ll do that. Now my item has been received. What I just covered was purchasing something with a purchase order, but there is a slightly different variation on this which uses a purchase requisition, immediately before the purchase order. The reason I did not start with a PR is that most companies don’t use them, at least not most of the companies I have dealt with. But, if you use them, or you want to use them, PR’s are not that complex. If I hover over Transactions, Purchases and click Enter Requisitions, I can enter a purchase requisition. Entering a PR is very similar to entering a PO, however you may notice that the vendor is not listed at the header level, which is all this stuff here at the top. It is, however, listed at the line level, and there is a reason for this. If I click this dropdown menu, I can enter items without entering a vendor. I can even enter items I know may have to come from different vendors. PR’s are turned into POs at the line item level, usually by an accounting clerk or purchasing agent, and are then sent out. I can put a vendor name in if I want to, but I don’t have to, and the person converting the PR does not have to use the vendor I pick. Or at least the system does not force them to natively. So, for this 400 Watt Power Supply, maybe I don’t care at all where it comes from but I need a thousand of them. I could put that in here and the purchasing manager might call around looking for the best deal. If they can find the part for five dollars less, they have just saved the company five thousand dollars. PR’s and PO’s can have different approval processes, they can be custom ones that you build with script or through a workflow, or they can be native to NetSuite. While there is no way to cover the infinite variations of approval processes that could be built, we can at least take a look at the native one for purchase orders. If I go to Transactions, Purchases, Enter Purchase Orders and Click List, I get to this list of purchase orders. This one here for Alexander Valley Vineyards is waiting on my approval. Now, the only reason I know this is because I created the purchase order earlier using a different account. For everyday usage, you will probably need to setup a saved search that can be used to show purchase orders waiting to be approved by any specific individual. The way I have seen this work best is to have that search added to each approvers dashboard, and have the search email results. This way a person who will be approving a PO will get an email asking them to approve the PO. If I click on edit for this purchase order, I can change the approval status to approved or rejected, and resave it. Occasionally you may receive product that you need to return. Maybe the product was damaged, or not what was advertised. To return product you can either go to Transactions, Purchases, and select Enter Vendor Return Authorizations, or you can go back to the PO itself. I have another PO that I received earlier. We can open this from our recent records. If I click this Authorize Return button up here I get the option to create a vendor return. If there were lines of products I did not need to return I could remove those. I could also edit the quantity so that I was only doing a partial return if I needed to. I can enter any other information I want, and click Save. This warning dialog is telling me that I need to enter a location at the line item level so I’ll go ahead and enter that, and now I can save my return. My vendor return is now pending approval. I’ll go ahead and approve the return by clicking Approve Return. Now I will do the actual return by clicking, you guessed it, Return. The rest of the return consists of NetSuite walking you through printing a return label so you can physically return the product. Purchasing and receiving is the first half of NetSuite’s procure to pay cycle; the procure part. In the next video, we will cover the second half which is pay.
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