In many Pakistani businesses, purchasing is a phone call. The seth calls the supplier, says 'send 50 cartons', and the truck arrives a few days later with a bill. Most of the time it works. Then one day the bill says 50 cartons, the godown received 48, nobody remembers what rate was agreed, and the supplier's ledger and yours disagree by thousands of rupees.
A purchase order process does not need to be heavy. For a small business it is five or six steps, each of which leaves a record. Those records are what save you when things go wrong.
The process at a glance
- Decide what to buy.
- Raise a purchase order.
- Approve and send it to the supplier.
- Receive the goods and record a goods received note.
- Match the supplier's bill to the order and the receipt.
- Pay the supplier and update the ledger.
Step 1: Decide what to buy
Buying should start from a written list. Look at which items have fallen below their reorder level, what is selling faster than usual, and any customer orders you have confirmed. Our guide on reorder levels and safety stock explains how to set these levels so the list builds itself.
Step 2: Raise a purchase order
A purchase order, or PO, is your written order to the supplier. It should show:
- PO number and date.
- Supplier name.
- Each item with quantity, unit and agreed rate.
- Total value.
- Delivery location, for example the shop or a specific godown.
- Expected delivery date and payment terms.
Here is a PO from a Sargodha wholesaler to a tea and biscuit supplier:
| Item | Qty (cartons) | Rate (Rs) | Amount (Rs) |
|---|---|---|---|
| Tea 950g | 50 | 3,200 | 160,000 |
| Biscuits family pack | 30 | 1,450 | 43,500 |
| Total | 80 | 203,500 |
Step 3: Approve and send
Decide who can approve orders and up to what amount. A simple rule works for most family businesses: the purchase manager can approve orders up to Rs 100,000, and anything above needs the owner. Send the PO to the supplier on WhatsApp or email and ask them to confirm the rates. A written confirmation of rates now prevents a rate argument later.
Step 4: Receive the goods
When the truck arrives, the godown keeper counts and checks the goods against the PO, not against the supplier's delivery challan. He records what actually arrived in a goods received note, or GRN, including any shortage or damage. The driver signs the GRN, or at least the shortage is photographed and sent to the supplier the same day.
Receive goods at the location where they physically land. If the truck unloads at the second godown, record the GRN there, or your stock by location will be wrong from the start.
Step 5: Match the bill
Before you accept the supplier's bill into your books, match three documents: the PO (what you ordered and at what rate), the GRN (what you received) and the bill (what the supplier is charging). This is called three-way matching. Pay only for goods that were ordered and received, at the agreed rate.
Worked example: a short delivery
The GRN shows 48 cartons of tea received instead of 50, and all 30 cartons of biscuits. The supplier's bill still shows the full Rs 203,500.
| Item | Ordered | Received | Rate (Rs) | Billed (Rs) | Should be (Rs) |
|---|---|---|---|---|---|
| Tea 950g | 50 | 48 | 3,200 | 160,000 | 153,600 |
| Biscuits family pack | 30 | 30 | 1,450 | 43,500 | 43,500 |
| Total | 203,500 | 197,100 |
The difference is 2 x 3,200 = Rs 6,400. You have two options: ask the supplier for a corrected bill, or record the full bill and issue a debit note for Rs 6,400 to reduce what you owe. Either way, the supplier's ledger in your books should end up at Rs 197,100 for this delivery, unless the two missing cartons arrive later.
Add the cost of getting goods to you
If you paid Rs 4,000 freight and loading for this delivery of 78 cartons, the cost per carton rises. Spread it in a way that is simple and consistent, for example equally per carton: 4,000 / 78 is about Rs 51.28 per carton. This is your landed cost, and it is the real cost you should price from.
Step 6: Pay and update the ledger
Pay against the matched bill, according to the agreed terms. Record the payment in the supplier's ledger the same day, with the method (cash, cheque, bank transfer) and reference. Your total of supplier balances is your accounts payable. Reviewing it each week tells you what is due soon and helps you plan cash, especially when your own udhaar collections are slow.
Handling advance payments and rate changes
Many suppliers, especially for sugar, ghee and other fast-moving staples, ask for payment in advance or at the time of booking. Record the advance in the supplier's ledger as soon as you pay it, with a reference to the PO. When the goods and bill arrive, the bill is set against the advance. If you paid Rs 200,000 in advance and the matched bill is Rs 197,100, the supplier owes you Rs 2,900, either as a refund or as credit against the next order. Without the PO and the advance entry, that Rs 2,900 is easily forgotten.
Rates also change between order and delivery, particularly when market prices are moving fast. Agree in advance whose rate applies: the rate on the PO or the rate on the delivery date. Write the answer on the PO. If the supplier insists on a new rate, update the PO before you receive the goods, so the matching step still works and the higher cost flows into your selling prices.
Track supplier performance
Your POs and GRNs, kept for a few months, tell you which suppliers deliver on time and in full. If one supplier was short on three of his last ten deliveries and another was never short, you have a clear reason to shift orders, or to ask the first supplier for better terms.
Who does what
| Step | Person | Record |
|---|---|---|
| Decide and raise PO | Purchase manager or owner | Purchase order |
| Approve | Owner above the set limit | Approval on the PO |
| Receive | Godown keeper | Goods received note |
| Match and enter bill | Accounts or munshi | Purchase bill, debit note if needed |
| Pay | Owner or accounts | Payment entry in supplier ledger |
Splitting these jobs between people, even in a family business, is one of the simplest protections against both honest mistakes and dishonest ones. The person who orders should not be the only one who receives and pays.
Running it in software
On paper, three-way matching means three files and a lot of flipping. In software the purchase, the stock receipt and the supplier ledger are linked, so a short delivery shows up at once. Taajir handles purchase orders, purchase invoices, stock and supplier ledgers together, and the purchase management software page explains the workflow. The same discipline works on the sales side with sale orders and delivery challans, covered on the quotation and delivery challan software page. Whatever system you use, the habit matters most: no purchase without an order, no bill without a receipt, no payment without a match.