Direct Purchase Paths
Alternative paths that skip item receipt or Purchase Order entirely.
Available Direct Paths
| Path | From PO? | Item Receipt? | Best For |
|---|---|---|---|
| Bill Direct | Yes | No | Services, pre-payment |
| Standalone Bill | No | No | Utilities, expenses |
| Drop Ship | Yes | Special | Ship to customer |
Bill Direct (No Item Receipt)
Skip the item receipt step - bill directly from Purchase Order.
When to Use
- Service purchases (no physical receipt)
- Expense purchases
- Non-inventory items
- Pre-payment scenarios
Flow Diagram
DIRECT VENDOR BILL PATH
─────────────────────────────────────────────────────────────────
Purchase Order #PO-001
│
│ (Skip Item Receipt)
│
└──▶ Vendor Bill #VB-001 (created directly from PO)
│
├── A/P created
├── Expense or inventory recorded
└── No IRNB clearing needed
GL Impact (For Inventory Items)
| Account | Debit | Credit | Why? |
|---|---|---|---|
| Inventory Asset | $5,000 | You now HAVE goods (Asset ↑) | |
| Accounts Payable | $5,000 | You OWE vendor (Liability ↑) |
Note: No IRNB clearing - this is a direct entry (receipt + bill combined).
GL Impact (For Expense Items)
| Account | Debit | Credit | Why? |
|---|---|---|---|
| Expense Account | $5,000 | Cost recognized (Expense ↑) | |
| Accounts Payable | $5,000 | You OWE vendor (Liability ↑) |
BILL DIRECT GL EXPLAINED
─────────────────────────────────────────────────────────────────
For Services ($5,000 consulting):
Consulting Expense $5,000 Dr ← Cost recognized
A/P $5,000 Cr ← You owe vendor
For Inventory ($5,000 widgets):
Inventory $5,000 Dr ← Goods received
A/P $5,000 Cr ← You owe vendor
Think: "Combined receipt + bill in one step"
Inventory Impact
For inventory items: Inventory increases at bill time (no prior receipt).
INVENTORY ON BILL DIRECT
─────────────────────────────────────────────────────────────────
Before Bill:
┌─────────────────────────────────────────┐
│ On Hand: 50 │
│ On Order: 100 (from PO) │
└─────────────────────────────────────────┘
After Bill Direct (100 units):
┌─────────────────────────────────────────┐
│ On Hand: 150 (increased) │
│ On Order: 0 (fulfilled) │
└─────────────────────────────────────────┘
Standalone Vendor Bill (No Purchase Order)
Create vendor bill directly without a Purchase Order.
When to Use
- Utility bills
- Recurring expenses
- Simple vendor payments
- Ad-hoc purchases without PO requirement
Flow Diagram
STANDALONE VENDOR BILL PATH
─────────────────────────────────────────────────────────────────
(No Purchase Order)
│
▼
┌──────────────────┐
│ VENDOR BILL │
│ (New) │
│ │
│ Created without│
│ PO reference │
└────────┬─────────┘
│
├── A/P created
├── Expense or inventory recorded
└── Ready for payment
│
▼
┌──────────────────┐
│ VENDOR PAYMENT │
└──────────────────┘
GL Impact (Expense)
| Account | Debit | Credit | Why? |
|---|---|---|---|
| Expense Account | $500 | Cost recognized immediately (Expense ↑) | |
| Accounts Payable | $500 | You OWE vendor (Liability ↑) |
Examples: Utilities, rent, insurance, subscriptions.
STANDALONE BILL GL - EXPENSE
─────────────────────────────────────────────────────────────────
Monthly Electric Bill: $500
Utilities Expense $500 Dr ← Expense recognized
A/P $500 Cr ← You owe utility company
Result: Expense recorded, bill ready for payment
GL Impact (Inventory)
| Account | Debit | Credit | Why? |
|---|---|---|---|
| Inventory Asset | $500 | You received goods (Asset ↑) | |
| Accounts Payable | $500 | You OWE vendor (Liability ↑) |
Note: Inventory increases directly - no PO commitment, no IRNB step.
Inventory Impact
INVENTORY ON STANDALONE BILL
─────────────────────────────────────────────────────────────────
Before Bill:
┌─────────────────────────────────────────┐
│ On Hand: 100 │
│ On Order: 0 (no PO) │
│ Available: 100 │
└─────────────────────────────────────────┘
After Standalone Bill (25 units):
┌─────────────────────────────────────────┐
│ On Hand: 125 (increased) │
│ On Order: 0 (no commitment step) │
│ Available: 125 │
└─────────────────────────────────────────┘
Drop Ship Purchase
Vendor ships directly to your customer - no warehouse handling.
When to Use
- Vendor ships directly to your customer
- No warehouse handling required
- Often linked to Sales Order drop-ship
- Large or specialized items
Flow Diagram
DROP SHIP FLOW
─────────────────────────────────────────────────────────────────
Customer places order
│
▼
Sales Order (Drop Ship Item)
│
├──▶ Purchase Order auto-created
│ │
│ └──▶ Vendor ships directly to customer
│
├──▶ Item Receipt (auto-created when tracking received)
│ │
│ └──▶ Creates Item Fulfillment on SO
│
└──▶ Vendor Bill from PO
Key Characteristics
| Aspect | Drop Ship Behavior |
|---|---|
| Inventory in your warehouse | No |
| Customer shipment | Direct from vendor |
| PO Auto-creation | Yes, from SO |
| Receipt tracking | Via SO fulfillment |
GL Impact
DROP SHIP GL FLOW
─────────────────────────────────────────────────────────────────
SALES SIDE (your customer):
A/R $1,000 Dr ← Customer owes you
Revenue $1,000 Cr ← You earned
COGS $600 Dr ← Cost of item sold
Inventory* $600 Cr ← Virtual inventory flow
PURCHASE SIDE (your vendor):
Inventory* $600 Dr ← Offset for COGS
A/P $600 Cr ← You owe vendor
*No physical inventory in your warehouse - these offset
Net Result:
You earned: $1,000 - $600 = $400 margin
Goods went: Vendor → Customer (not through you)
When Drop Ship Triggers
DROP SHIP TRIGGER POINTS
─────────────────────────────────────────────────────────────────
Item Setup:
√ Drop Ship checkbox enabled on item
√ Preferred vendor set
Sales Order:
1. Customer orders drop ship item
2. SO saved → PO auto-generated to vendor
3. PO links to SO line
Fulfillment:
1. Vendor ships to customer
2. Tracking entered on PO or SO
3. Receipt/Fulfillment auto-created
Comparison: All Purchase Paths
| Aspect | Standard Path | Bill Direct | Standalone Bill | Drop Ship |
|---|---|---|---|---|
| Purchase Order | Yes | Yes | No | Yes (auto) |
| Item Receipt | Yes | No | No | Virtual |
| Creates A/P | At Bill | At Bill | At Bill | At Bill |
| Inv Increases | At Receipt | At Bill | At Bill | No* |
| Best For | Goods | Services | Expenses | Ship to customer |
*Drop ship doesn't increase your inventory - goods go directly to customer
Decision Guide
WHICH PATH SHOULD I USE?
─────────────────────────────────────────────────────────────────
Do you need to physically receive goods in your warehouse?
│
├── YES ──▶ Standard Path (PO → IR → Bill)
│ │
│ └── Gives you three-way match and inventory tracking
│
└── NO ──▶ Is this a recurring/simple expense?
│
├── YES ──▶ Standalone Vendor Bill
│ (No PO overhead)
│
└── NO ──▶ Is vendor shipping to your customer?
│
├── YES ──▶ Drop Ship
│ (Set up item for drop ship)
│
└── NO ──▶ PO → Bill Direct
(Services, consulting, etc.)
NEED APPROVAL WORKFLOW?
─────────────────────────────────────────────────────────────────
Need approval before purchase?
│
├── YES ──▶ Use Purchase Order (with approval workflow)
│ │
│ ├── Physical goods? → Standard Path
│ └── Services? → Bill Direct
│
└── NO ──▶ Standalone Vendor Bill
(Direct entry, no PO)
Special Scenarios
Blanket Purchase Order
BLANKET PO FLOW
─────────────────────────────────────────────────────────────────
Blanket PO #BPO-001: Annual agreement for 10,000 units
│
├── Release #1: 1,000 units (Month 1)
│ ├── Item Receipt #IR-001
│ └── Vendor Bill #VB-001
│
├── Release #2: 1,500 units (Month 2)
│ ├── Item Receipt #IR-002
│ └── Vendor Bill #VB-002
│
└── ...continues through year
Landed Cost
LANDED COST FLOW
─────────────────────────────────────────────────────────────────
Purchase Order: $10,000 (goods)
│
├──▶ Item Receipt (goods)
│ Inventory: $10,000
│
├──▶ Landed Cost (freight, duty)
│ Additional: $500
│
└──▶ Total Inventory Cost: $10,500
- Freight, customs, insurance added to inventory cost
- Prorated across items by value, weight, or quantity
Next Steps
- Standard Path - Full PO → IR → Bill flow
- Returns to Vendor - Handle vendor returns and credits