NETSUITE PROJECT

Module 3: Purchase to Pay

Module 3 – Item Creation and Purchasing Cycle (Purchase to Pay)

Objectives

In this module, you will

 Define a new Item (product)

 Purchasing Cycle (Purchase to Pay)
o Create a purchase order
o Receive items
o Bill a purchase order
o Pay the bill
o Print a check for the vendor
 Complete a hand-in homework assignment at the end of this tutorial

If you make a mistake in this training environment, you may back out or delete your work or simply start over again.

3 – 1: Defining a Company Item

In this exercise, you will define a new item/product. NetSuite defines items as both the physical products and the services that
you sell to your customers. Items can also include supplies, gift certificates, kits, assemblies, and subcontracting fees. For
this tutorial, we will only use the following item types:

Inventory Items – Items that a company stocks and sells. Example: a bicycle.
Service Items for Sale – Charges for a service your business performs that is billed to a customer. Example:
charges for doing a tax return.

Perform the following steps to add a new Apple Watch as an inventory item:

1. Navigate to Lists > Accounting > Items > New.

2. The New Item page displays. Select the Inventory Item link.

3. The New Inventory Item page displays.

4. First, before filling out any fields, you need to change the form type. Select “Standard Inventory Part Form”
from the “Form” field drop down menu.

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5. Fill out the fields according to the below:

 Item Name/Number: Apple Watch Series 9 – 45mm – 64GB

 Display Name/Code: Apple Watch Series 9 – 45mm – 64GB
 Subsidiary: Parent Company: United States – West

6. On the Purchasing/Inventory tab, enter or select the following information:

 Purchase Description: Apple Watch Series 9 – 45mm – 64GB

 Purchase Price: $200.00

7. Scroll down to Locations, select US-1 from the “Preferred Warehouse” drop-down menu.

8. On the Vendors subtab, enter or select the following information:

 Vendor: Select Apple Store in the Vendor Field. This should automatically populate.
 Preferred: Checked. Click the blank space on the Vendor line under Preferred. Click the little box that appears.
 Click the ADD button to add this vendor as the designated vendor for your new item.

9. On the Pricing subtab above, enter or select the following information:

 Sales Description: Apple Watch Series 9 – 45mm – 64GB

 On the US Dollar subtab, enter the Base Price: 299.00 Alternative selling prices will
automatically be calculated when you exit this field.

10. On the Accounting tab, enter or verify the following information:

 COGS Account: 5000 Cost of Goods Sold

 Asset Account: 1210: Inventory In Stock
 Income Account: 4010 Revenue : Sales from the drop down list of accounts.
 Gain/Loss Account: 5800 Cost of Goods Sold: Inventory Adjustments

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 11. Tax Schedule: Non Taxable

12. Click the Save button to save your new item.

13. Verify that your item has been correctly added by going to Lists > Accounting > Items. You can
search by entering a keyword in the description field. Find your new item in the search results and
click Edit or View.

If proper internal control procedures are followed, should the Account Receivable analyst be able to add new
items?
Answer: No, one of the Account Receivable analyst’s tasks is to reconcile inventory accounts and analyze inventory-
related financial data. If they can modify the master file, they may post some adjustment to cover some faulty acts. Or an
AR analyst can also intentionally manipulate inventory data to conceal discrepancies or errors in accounts receivable.

Of the listed roles, which one is most appropriately suited to modify the inventory file?
Answer: Inventory manager

3 – 2: Setting Accounting Preferences for Purchase Orders

In this exercise you will enter accounting preferences for your NetSuite account that will be used when purchasing
your items. You may ignore accounting preferences that are not specifically addressed in the instructions.

1. Navigate to Setup > Accounting > Accounting Preferences. The Accounting Preferences page displays.

 Select the Order Management Tab. Scroll down in the Receiving section and make sure the Bill
in Advance of Receipt is not checked and click Save. If this option is enabled, purchase orders
would automatically be converted into billed purchase orders (vendor invoices) before any items are
received, which would be risky.

2. Click the Save button.

3 – 3: Creating a Purchase Order

In this exercise, you will create a purchase order to purchase multiples of your new item. NetSuite allows you the flexibility to
customize the purchasing process based upon each company’s business requirements. For this exercise, the purchasing
process will include creating a purchase order, receiving items, billing a purchase order (approving payment), paying a vendor,
and printing a check. This is also called the “Purchase to Pay” process.

You are now the purchasing agent, and you will enter a purchase order to buy your items from the vendor. If you
discover that you made a mistake after you create your purchase order, you can re-edit the purchase order or delete it
and start over again.

1. Navigate to Transactions > Purchases > Enter Purchase Orders. The New Purchase Order page opens.

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2. Enter or select the following information.

 Form: Purchase Order 2

 Vendor: Apple Store
 Date: 12/26/2023
 Receive By: This is the date that you want the items delivered. Use the pop-up calendar and enter a
date two weeks from today.
 Note that the current date and purchase order number are automatically entered on the form.
 Location: US - 1

3. On the Items tab, enter the following information.

 The Expense option is selected by default. Select the Items option (Items under the Items tab).
 Item: iPad Pro 9.7in - 32GB (If you are seeing categories like Advertising, Airfare then you did not select the
items tab next to the Expense tab.)
 Quantity: 10 The total purchasing cost is automatically entered into the Amount field.
 Click the Add button to add this item.

4. Select the Billing tab.

 Terms: 1% 10 Net 30
 If the Billing Address for the vendor is blank or Unnamed Address, you can easily enter the vendor’s
billing address without going to the vendor record. In the Vendor Select field, select New. A New
Address window appears. Enter the address as 123 This Street, Kansas City, Kansas 66102.
 Click the Save button on this pop-up window to add the vendor address to this purchase order. This
will also add the address to the vendor record.

5. Select the Shipping tab and select “11 Internal – US” from the Ship To dropdown menu.

6. When your purchase order is complete, click the Save button to save the purchase order. The Purchase
Order page opens showing your new purchase order. Note that the status in the upper right corner is
Pending Receipt. The status field is very important since it reflects where the order is in the purchasing
process.

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 7. You’ll want to save this as a PDF in preparation for your hand-in assignment at the end of this module:

 Click on the Print icon. This icon is located at both the top and the bottom of the page.
 The purchase order is displayed in Adobe Acrobat PDF format in a new browser tab.
 Save the PDF.
 Close this browser tab and return to NetSuite.

8. If you need to retrieve this purchase order at a later time, you can access it by going to
Transactions > Purchases > Enter Purchase Orders > List and selecting your purchase order.
Remember, a faster method would be to select your purchase order from the Recent Records portlet on
your Dashboard.

Requiring purchasing agents to select from a pre-populated list of vendors, and restricting who can edit that list is
an example of which ordering control identified in Chapter 15?
Answer: segregation of duties

3 – 4: Receiving Items on a Purchase Order

In this exercise, you are the receiving clerk in the warehouse, and you will receive the items that you ordered.
Let’s assume that the purchase order was sent a week ago to the vendor and your items have now arrived at the
loading dock at the San Francisco warehouse.

1. Navigate to Transactions > Purchases > Receive Orders. The Receive Order page opens listing
all of the purchases orders that are pending receipt.

2. Locate the purchase order you created and click on the Receive link. (An alternate method would
be to navigate to the Recent Records portlet on your Dashboard, select (do not edit) your purchase
order, and click on the Receive button.)

3. The Item Receipt page opens.

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 4. Enter or verify the following information in the Items & Expenses tab, Items subtab:

 Receive: Checked
 Change Date to 12/30/2023
 Change Posting Period to Q4 2023
 Quantity: 10 (If you received fewer than 10 items, this would be a partial receipt. You would change
the quantity to the amount actually received. Your purchase order would then have outstanding line
items and/or quantities. The purchase order’s status would be changed to Pending Billing / Partially
Received or Open Purchase Order until all items have been received.)
 Location: US-1
5. Click the Save button

Go back to the Purchase Order, what is the status of the purchase order now?
Answer: Pending bill

The immediate updating of the quantity of inventory items on hand indicates what type of inventory system?
Answer: Perpetual inventory

To make sure that unordered items are not accepted, what should the receiving department make sure to identify prior to
accepting an order?
Answer: Receiving department should compare packing slip with purchase order

3 – 5: Billing a Purchase Order

In the previous exercises you created a purchase order and received the items. In this exercise you are the
accounts payable manager, and you will bill the purchase order. This means that you are going to approve the
purchase order for payment and a credit will be posted to accounts payable. This step has traditionally been
performed after the vendor invoice has been received. In today’s business world, receiving the vendor invoice is not
a requirement.

From chapter 14, a system that eliminates the need to prepare and process invoices is called?
ANSWER:

1. Navigate to Transactions > Payables > Bill Purchase Orders. The Bill Purchase Orders page
opens.

2. Locate the purchase order that you created and click on the Date link. The Purchase Order page opens.
Again, a faster way to navigate to this page would be to click on your purchase order from your Recent
Records portlet on your Dashboard.

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 3. As stated previously, the purchase order’s status will tell you whether all items on the purchase order have been
received. For additional information about the receipt(s), you can click on the Related Records tab and Receipts &
Bills subtab. All activity associated with this purchase order will be listed. If necessary, you can then click the Item
Receipt date to view the Item Receipt page for more details.

4. After verifying that the items and quantities are correct (and match those on
the vendor invoice), click the Bill button. The Bill page opens.

5. Change the Date to 12/31/2023 and select the Billing tab. You are paying within 10 days so you should
have a $34 discount (remember the vendor offered terms of 1% 10 Net 30). Verify that the correct total is
displayed in the AMOUNT AFTER DISCOUNT field.

6. Click the Save button. Open the purchase order and identify the current status.
Answer: Fully billed

Changing the status to of the purchase order to “your previous answer” is an example of which processing integrity
control, designed to ensure that invoices are not input twice?
Answer: Data entry control – Using transaction log ensure that transactions are not lost or entered twice.

3 – 6: Paying the Bill

Once you have billed (approved payment of and billed accounts payable) your purchase order, you are ready to
pay the vendor. In this exercise, you are still the accounts payable manager, and you will pay the vendor’s bill
which means the payment will be recorded as an expense, a debit will be posted to accounts payable, and the bill
will be paid with a check or an electronic funds transfer (Automated Clearing House transaction). For this exercise,
you will pay with a check.

1. Navigate to Transactions > Payables > Pay Single Vendor. The New Bill Payment page opens

2. Select Apple Store from the drop down list as the Payee.

3. Change Date to 12/31/2023 and change Posting Period to 2023 Q4 and check the To Be Printed box.

4. Verify that the Account field is 1020 Cash: US Checking 2.

5. On the Apply tab, check the Apply box next to your bill payment to Apple Store. The DISC. TAKEN
should be the entire discount available of $34.00 and the payment amount should be $3,366.00. Note: If
you have multiple outstanding bills for the same vendor, you could select all the bills and make a single
payment.

6. Click the Save button.

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3 – 7: Printing a Check for the Vendor

Once you have paid the bill (posted expenses and payments) for your purchase order, you will want to print out a
check to be sent to the vendor. In this exercise, you are now the cashier, and you will print a check that is payable
to the vendor. Checks are usually printed in a batch mode using special pre-printed check forms periodically during
the month. These check forms should be stored in a secure place.

1. Navigate to Transactions > Management > Print Checks and Forms and select the Checks link. The Print
Checks page opens.

2. In the Account field, select 1020 Cash: US Checking 2.

3. All the checks waiting to be printed are listed.

4. Check the Print box for Apple Store.

5. Verify that a number (any number) is displayed in the First Check Number field. This number would
normally be the first sequence number on the stack of pre-printed check forms.

6. Click the Print button.

7. The check is displayed in Adobe Acrobat PDF format in a new browser tab. You should see the check that includes
the $3,366 payment.

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 8. If you need to return to the check at a later date:

 Navigate to Transactions > Bank > Write Checks. The New Check page appears.
 In the Account field, select 1020 Cash: US Checking 2.
 Under More Actions select Go to Register.
 Find the check and click on the Edit link.
 Click Save and Print.

9. Several documents and document numbers were created as you worked through the steps in the
purchasing cycle. See if you can “audit the trail” by starting with your purchase order and finding the related
item receipt, bill payment, and finally, the check. Additionally, try reversing the process by starting with your
check and backtracking to find the related purchase order.

Module 3: Assignment
Use your NetSuite account to perform the following transactions for your company. This is an individual assignment.
This is not a group project. Your work is your own.

1. Add One Inventory Item of your choosing that you will purchase from a vendor. Enter meaningful
information for the following fields.

 Item Name/Number: P o r t a b l e m o n i t o r 1 4 ”
 Display Name and Sales Description( make both the same as item name): P o r t a b l e m o n i t o r 1 4 ”
 Date: Date in December 2023
 Purchase Price: $150 (USA currency)
 Preferred Location: US - 1
 Preferred Vendor: Select any vendor as your preferred vendor.
 Base Sales Price: $ 3 5 0 (USA currency)
 COGS Account: Cost of Goods Sold
 Asset Account: Inventories: Inventory in Stock
 Income Account: Revenue: Sales
 Tax Schedule: Non Taxable

2. Create a purchase order for your inventory item. You should have previously set up your inventory item.
(Note: You will not purchase any service items).
 Vendor: Select the vendor that you defined for your inventory items.
 Receive By: Two weeks from today
 Location: US - 1
 Terms: 1% 10 Net 30
 Add the item with an quantity of 10
 There is no sales tax or shipping fee.
 Add shipping address of 11 Internal - US
 Verify that the vendor has a billing address. You may need to enter a fictitious address here.

3. Save a PDF copy of your purchase order to hand in to your instructor. Your vendor should have a name
and billing address.
4. Perform the business process steps to receive, bill, and pay for your purchases. Apply the billing
terms to receive a 1% discount. Attach the purchase order and check to the end of this document and
upload to Canvas.

Your purchase order should have Your check should have

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  *Your logo image  Same vendor name and address as on purchase order
 *Your company name and address  Check amount should be PO amount less 1% discount for
 Vendor name and billing address payment within 10 days
 Correct billing terms
 Inventory items with descriptions
 Quantities should be 10
 No individual item discounts, tax charges or
shipping fees

You may sign out of your NetSuite account. This is the end of Module 3.

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