# From purchase order to payment: simple buying for SMEs > Raise a purchase order for what you need, record the goods when they arrive, match the vendor's bill to the order and the receipt, then pay against the bill after deducting TDS where it applies. Each step is short, and together they stop overbilling, duplicate bills and lost input tax credit. Most buying problems in a small business are not fraud. They are a bill paid twice, goods that were short but billed in full, a rate that crept up without anyone noticing, or input tax credit lost because a bill was never entered. A simple, written buying process fixes most of them without slowing anyone down. ## The five steps 1. **Purchase order:** you tell the vendor what you want, at what rate and when. 2. **Approval:** someone with authority agrees to spend the money. 3. **Goods receipt (GRN):** you record what actually arrived. 4. **Purchase bill:** you enter the vendor's invoice and match it to the order and the receipt. 5. **Payment:** you pay against the bill, less any TDS, and send the vendor the details. ## 1. Raise a purchase order A purchase order (PO) is your written offer to buy. It should show the item, quantity, rate, GST, delivery date and place, and payment terms. Send it to the vendor by email or as a PDF, and ask them to quote your PO number on their invoice. The PO protects both sides. Your vendor knows exactly what to supply, and you have something to check the bill against. It also tells you what is on order, so you do not order the same thing twice. ## 2. Keep approvals simple Approval does not need a committee. Decide in writing: - Who may raise a purchase order (for example, the purchase person or the store in charge). - Up to what value they may order without asking. - Who approves above that value (usually the owner or a partner). For most SMEs, one limit and one approver is enough. Review the list of open purchase orders once a week, so nothing sits forgotten. ## 3. Receive the goods properly When goods arrive, the store checks them against the PO and the delivery challan: count the quantity, check the items and their condition, and note batch numbers and expiry dates where they matter. Record this as a goods receipt note (GRN). Record what actually arrived, not what the challan says. If 95 cartons arrive against 100 ordered, the GRN says 95. Your stock is updated from the GRN, so it matches what is on your shelves. ## 4. Match the bill before you accept it When the vendor's bill arrives, compare it with the PO and the GRN before you enter it. This is three-way matching: - **Items** on the bill are the ones ordered and received. - **Quantity** billed is not more than the quantity received. - **Rate** is the rate on the PO. - **GST** is correct: IGST for a vendor in another state, CGST and SGST for a vendor in yours, at the right rate for the item. - **Your GSTIN** and the right branch are on the bill, so the input tax credit comes to you. If anything differs, ask the vendor for a corrected bill or a credit note before you enter it. Enter the vendor's bill number and date exactly as printed. It helps you match the bill to GSTR-2B later and makes duplicate bills easy to catch. ## 5. Pay against the bill, with TDS where it applies Pay each vendor against specific bills, oldest first, so both of you agree on what is still due. Note any advance you paid earlier and set it off against the bill. **TDS on payments to vendors.** Many payments by a business need tax deducted at source: contract work, professional and technical fees, rent, commission and, for larger buyers, purchases of goods above a yearly limit. Each kind of payment has its own rate and threshold. From 01-04-2026, these provisions are in section 393 of the Income-tax Act, 2025, which replaced the sections of the 1961 Act (such as 194C and 194J) for payments made or credited from that date. Deduct the tax, deposit it on time, file the quarterly TDS return and give the vendor their certificate. Your CA can confirm which payments are covered for your business. **Pay on time.** Two rules make late payment expensive: - **GST:** if you do not pay a vendor within 180 days of the invoice date, you must reverse the input tax credit you took on that bill, and you can claim it again when you pay. - **MSMED Act:** micro and small enterprises must be paid within the agreed period, which cannot exceed 45 days, or within 15 days where nothing was agreed. Late payment carries interest. **Cash limits.** Pay vendors from the bank. Large cash payments to one person in a day can make the expense disallowed for income tax. After paying, send the vendor a payment advice listing the bills paid and any TDS deducted, so their accounts match yours. ## Signs your process is working - Every purchase bill has a PO number (except small expenses you have agreed to skip). - The list of goods received but not billed is short and recent. - Your GSTR-2B reconciliation shows few bills missing from your books. - Vendors rarely call about unpaid or wrongly paid bills. ## Doing it in EaseDesk In EaseDesk, go to **Purchases** to create a purchase order and email it to the vendor as a PDF. When goods arrive, convert the order into a goods receipt (GRN), which updates stock in the right warehouse with batches and expiry, and then convert that into a purchase bill with the vendor's bill number and date. The same vendor bill number twice in a financial year is refused. Pay from **Payments** against one or more bills, with TDS worked out on the bill or the payment. Roles control who can create purchase documents; approval rules for purchase orders are [coming soon](/solutions/purchases). See [purchase orders and bills](/help/supply-chain/purchase-orders-and-bills) and [vendor payments](/help/supply-chain/vendor-payments). ## Questions ### Does a small business really need purchase orders? For regular stock and anything above a small amount, yes. A purchase order puts the agreed item, quantity, rate and delivery terms in writing, so you can check the bill against it. For small one-off expenses, a bill alone is usually enough. ### What is three-way matching? Checking that the purchase order, the goods receipt and the vendor's bill agree on item, quantity and rate before you pay. It catches short supply, rate changes and bills for goods you never received. ### When should I deduct TDS on a vendor payment? When the payment is of a kind covered by the TDS rules (work contracts, professional or technical fees, rent, commission and some purchases of goods) and crosses the threshold for that kind of payment in the year. Tax is deducted at the time of credit or payment, whichever is earlier. Confirm the sections and rates for your vendors with your CA. ### How fast must I pay a micro or small enterprise? Under the MSMED Act, within the period agreed in writing, which cannot be more than 45 days from accepting the goods or services, or within 15 days if nothing was agreed. Late payment carries interest, so ask vendors whether they are registered as micro or small enterprises. --- Source: https://www.easedesk.com/blog/purchase-order-automation-india-2025 · Updated 2026-09-28 · EaseDesk