The Purchase Order Process for Small Business: From Requisition to GRN

Step-by-step purchase order workflow for Indian SMEs: requisition, approval, PO issue, goods receipt note, and three-way match.

Why a formal PO process pays for itself

Without a PO process, small businesses end up with duplicate orders, mystery deliveries, and disputed invoices that no one can verify. A simple workflow with four stages — requisition, approval, PO issue, and goods receipt — eliminates ninety percent of these problems. It also creates the paper trail your CA needs for GST input credit and your auditor needs for inventory reconciliation. Even a two-person business benefits from the discipline.

Step 1: Requisition and approval

A requisition is an internal request for goods, raised by whichever team needs the material — production, sales, or admin. It should list SKU, quantity, expected price band, and required-by date, going to a designated approver before a PO is issued. Approval limits should be tiered: anything under ten thousand rupees approved by a department head, anything larger by the owner. This single gate prevents impulse buying and shadow inventory.

Step 2: Issuing the purchase order

The PO is your formal offer to buy and must include vendor details, GSTIN, item description, HSN code, quantity, unit price, taxes, delivery address, payment terms, and a unique PO number. Email it to the vendor and require an acknowledgement before the order is treated as active. Maintain a sequential PO register so nothing falls through the cracks. POs also serve as legal proof of the agreed price if the vendor later tries to revise.

Step 3: GRN and the three-way match

When goods arrive, your store team should record a Goods Receipt Note (GRN) listing quantity received, condition, and any short shipment. Before payment, run a three-way match between the PO, GRN, and supplier invoice — quantities, rates, and taxes must align across all three. Any mismatch triggers a debit note or vendor query, never a silent payment. This is the single most effective fraud and error control in procurement.

Automate the PO loop in BillBabu

BillBabu generates GST-compliant purchase orders with HSN, tax breakdown, and your branding, then lets you record GRNs and link them back to the original PO. The three-way match becomes a one-click reconciliation, surfacing mismatched values before you release payment. Vendor ledgers, outstanding POs, and pending GRNs are visible from a single dashboard. Try it free at billbabu.com to professionalize your procurement.

---

Built for Indian small businesses. BillBabu is GST-compliant billing software that helps you create invoices, manage estimates, track payments and stay audit-ready — from your phone. Learn more about BillBabu or download the app.