Purchase Invoice

A Purchase Invoice is the invoice you pay your supplier in return for goods or services they have rendered. This invoice is the foundation for how you'll pay your supplier and is a vital aspect of maintaining accounts payable and expenses tracking for your business.

In ERPNext, the Purchase Invoice is the reverse of a Sales Invoice, but from the buyer's side. Rather than earning income, you account for expenditures made and liabilities to your vendor. Creating a Purchase Invoice is practically the same as making a Purchase Order, except that you have an added responsibility of financial posting and follow-up payment tracking.

Navigating to the Purchase Invoice Module

For viewing or creating Purchase Invoices, go through:

This will redirect you to the list view of all past invoices, in which you can make new ones or filter/search existing records.

1. Prerequisites

Before creating a purchase invoice, it is necessary to have a few prerequisite records already in the system. These records automate data retrieval and provide accuracy in financial reporting. During company setup, these prerequisite records must be in place.

• Item: The goods or services you are buying need to already be materialized in the item master.
• Supplier: The business entity or vendor from whom you're buying goods/services ought to be registered in the Supplier master.
• Purchase Order: Preferably, there would exist a linked purchase order to monitor commitments made to the vendor.
• Purchase Receipt (optional): This is a proof of delivery and can be used for taking receipt of goods prior to invoicing but is not a requirement in all instances.

Having these components ready in advance guarantees a hassle-free and streamlined purchase invoice generation process.

2. How to create a Purchase Invoice

In ERPNext, a purchase invoice is generally created directly or by copying data from a purchase order or a **purchase receipt. From these source documents, it auto-fetches supplier-related item information, quantities, and prices, which saves time and minimizes errors.

If you're creating the invoice using an existing order or receipt, simply click the "Get Items From" button. You'll then be prompted to select either a purchase order or purchase receipt, and the relevant item and pricing details will be pulled into the invoice automatically.

However, if you want to create a purchase invoice manually (without a reference document), you can follow these steps:

• 1. Navigate to the list of Purchase Invoices and click on New to open a new invoice record.
• 2. Choose the supplier from whom you are placing the order for the items and also select the company. Next, choose the **Required By Date to specify when the goods are required.
• 3. The posting date and time will automatically be set to the current time by default. If necessary, you may uncheck the box under "Posting Time" and manually adjust the timestamp.
• 4. Add Due Date—the date by which payment to the supplier is due.
• 5. Add items or services that you bought in the Items table, with their corresponding quantities.
• 6. Rate (price per unit) and Amount will be populated automatically according to the item settings or the document attached.
• 7. After entering all the mandatory information, click on Save to store the invoice in draft mode. If it all appears to be correct, click on Submit to complete and post the invoice to the system.

After being submitted, the purchase invoice becomes part of your accounting record, and any subsequent payment entries or accounting reports will contain this transaction.

2.1 Additional options when creating a Purchase Invoice

When making a purchase invoice in ERPNext, there are a few more options that offer more control and flexibility when issuing an invoice. Those options enable management of different situations such as advance payment, returns, and withholding tax.

• Is Paid: Check this box if payment has already been received for the full or part payment against the invoice using an Advance Payment Entry. This will enable the system to mark the invoice as paid (partially or fully) and associate the payment record directly with the invoice. It also assists with correct aging reports and eliminates duplicate payments.

• Is Return (Debit Note): In case the goods listed in the invoice have been returned to the supplier, you may check this checkbox. This will be treated as a return entry, and ERPNext will regard it as a debit note. You would generally use this when the goods are damaged, excess quantities delivered, or rejected because of quality reasons. For more information about this feature, you may check out the **Debit Note documentation.

• Apply Tax Withholding Amount: This option is only active if the supplier selected has a Tax Withholding Category set up within their master record. When active, the system will automatically apply the correct withholding tax on the invoice. This will prevent non-compliance with regional taxes and eliminate errors from manually entering taxes. For setup and usage instructions, go to the Tax Withholding Category page.

These optional fields come in handy when making your invoicing process accurate, efficient, and regulatory and financial reporting compliant.

2.2 Statuses

In ERPNext, a Purchase Invoice may pass through different statuses based on activities performed and the life cycle of the transaction. Each status represents the invoice's present place in the accounting process and aids in tracking, reporting, and vendor liability management.

• Draft: This is the original state of the invoice when it has been created and saved but not posted. It is still editable during this phase and does not impact any ledgers or accounts.

• Return: This status occurs when the products have been returned to the supplier after the invoice was posted. It indicates that the original purchase has been reversed, either completely or partially.

• Debit Note Issued: When a debit note is raised against a purchase invoice because goods were returned, this status appears. It indicates that not only were goods returned, but an actual accounting entry was also made to account for the payable.

• Submitted: Once the invoice is posted and submitted, it is a permanent transaction in the system. The system updates the general ledger, and the invoice is locked to prevent any more edits.

• Paid: Once the supplier is completely paid against the invoice and all payment entries associated with it have been successfully posted, this status is shown. It indicates no more payment is due on this invoice.

• Partly Paid: When part of the invoice value has been paid to the vendor and related payment entries are present, the invoice depicts this status. It assists in monitoring outstanding balances and making future payments.

• Unpaid: It shows that the invoice has been posted, but payment has not yet been made. It is outstanding in the system and appears in accounts payable reports.

• Overdue: When the payment due date has expired and the invoice is unpaid or partially paid, it is identified as overdue. It assists the finance team in sequencing outstanding payments and maintaining vendor relations.

• Canceled: This status is displayed once the invoice is canceled, for example, due to data entry mishaps, alteration in agreement, or duplicate entries. A canceled invoice does not affect ledgers or accounts and is retained solely for audit purposes.

Every status is critical in ensuring financial accuracy, workflow transparency, and vendor reconciliation.

3. Features

3.1 Accounting Dimensions

Accounting Dimensions in ERPNext offer an effective means of classifying and reporting on your financial transactions. They enable you to label every transaction—Purchaser Invoices, Sales Invoices, Journal Entries, and so forth—with your specialized dimensions such as Territory, Branch, Department, Customer, or any other organization that is significant to your business. This feature greatly simplifies producing detailed, filtered financial reports geared towards unique business segments.

For instance, if your company has multiple branches or territories, you can allocate a suitable dimension (such as "Branch" or "Territory") to each transaction. Subsequently, when displaying profit and loss, balance sheet, or general ledger reports, you are able to filter data using these dimensions and make better sense of unit performance.

This is particularly useful for companies wishing to track expenses, revenue, and profitability across various business units, customers, or segments of projects. It replaces the requirement of having distinct accounts for every branch or region and provides consolidated and segmented financial reporting from a single combined ledger.

To set up and learn more about accounting dimensions, you may go through the accounting dimensions documentation page in ERPNext.

3.2 Holding the Invoice

There are times when you might need to hold a Purchase Invoice temporarily, such as pending approvals, issues with quality, or internal examination. ERPNext gives you the choice of holding or blocking a purchase invoice prior to its submission and even after its submission.

Below is how each holding mechanism works:

• Hold Invoice (Before Submission)
  • You can select the "Hold Invoice" option on the Purchase Invoice form before submission.
  • Once activated, and the invoice is submitted, its status will be "Temporarily on Hold."
  • This feature is useful if you need to enter the invoice now but settle later after considering supplier delivery or other in-house validations.

• Change Release Date (After Submission)

  • If you have already submitted the invoice and need to alter its release date, you can do so through the "Hold Invoice" button on the top-right of the invoice form.
  • Tapping this will bring up a dialogue box in which you can change the release date and optionally include a reason for holding the invoice.
  • This is useful when the hold duration needs to be extended or adjusted due to shifting conditions.

• Block Invoice (After Submission)

  • If you’ve already submitted the invoice and want to stop it from being processed for payment, use the “Block Invoice” button.
  • This marks the invoice as blocked, preventing it from appearing in Payment Entry references.
  • Once you are ready to permit payments anew, you can click on "Unblock Invoice" and lift the hold.

• Supplier-Level Blocking
  • Along with holding single invoices, you can also put an entire supplier on hold. This will keep all transactions regarding that supplier locked up until the hold is released.
  • This is well-suited for cases where the vendor is being scrutinized, or has compliance issues.

By utilizing these options, you have greater control over your accounts payable, prevent premature payments, and manage exception cases with ease in the ERP system.

3.3 Supplier Invoice Details

ERPNext enables you to capture details that are available on your actual invoice document from your supplier. Such fields assist in documentation as well as future reconciliation.

• Supplier Invoice No.: This is the number given by the supplier on their physical or electronic bill. Filling in this field allows you to cross-reference your internal invoice with the supplier's reference, which is particularly useful during audits or when resolving conflicts.

• Supplier Invoice Date: This is the date cited on the supplier's invoice, representing when the supplier issued or authorized the bill on their side. Maintaining this field accurately is helpful in knowing billing cycles and payment terms, particularly with overseas suppliers or long lead-time orders.

These fields do not affect accounting but enhance documentation and clarity in supplier communications.

3.4 Address and Contact

ERPNext enables you to associate detailed contact and address information of the supplier with the Purchase Invoice directly. This guarantees seamless communication and proper billing and delivery documentation.

• Supplier Address: This is the billing address of the vendor, which is picked automatically from the supplier master if it has been set up. It helps the invoice display the correct legal entity and billing location of the vendor.

• Contact Person: If your supplier has more than one representative, this field allows you to name and link the correct contact person who will be responsible for processing your order. In case the contact has already been set in the supplier master, ERPNext will automatically fill it in the invoice.

• Shipping Address: The destination where the products will be shipped physically. It may be your factory, warehouse, or other receiving facility. The address might be different from the billing address and needs to be chosen judiciously to prevent delivery discrepancies.

These fields enhance documentation readability and are particularly useful in the case of multiple branches, foreign suppliers, or high purchase volumes.

3.5 Currency and Price List

ERPNext supports multi-currency transactions and pricing rules, allowing users to manage cross-border purchases efficiently.

• Currency: This option specifies the currency in which the purchase invoice is being issued. The system usually gets the currency from the associated purchase order, but you can also manually enter it. For instance, if you're a UK-based business importing from a European supplier, you can set the currency to **GBP when the supplier is quoting in EUR.

• Price List: If you have a Purchase Price List already set up for certain suppliers or items, choosing it here enables ERPNext to automatically pull item rates. It ensures uniformity and prevents manual rate entry mistakes.

• Ignore Pricing Rule: By checking this box, any pricing rules previously created in the system through Accounts > Pricing Rule will be ignored. This is helpful when you wish to manually manage item pricing or use special supplier-specific pricing.

It is important to understand and properly utilize these fields so your Purchase Invoice can accurately represent rates and currency values a,nd maintain international transaction continuity and continuity in negotiating with suppliers.

For additional information, see the Price Lists and Multi-Currency Transactions documentation in ERPNext.

3.6 Subcontracting or 'Supply Raw Materials'

Subcontracting is supported in manufacturing and assembly operations in ERPNext, where you supply raw material to a supplier for manufacturing finished products on your behalf. The 'Supply Raw Materials' option plays a significant role here.

• Enabling the Supply Raw Materials checkbox flags the Purchase Invoice as a subcontracting transaction and enables ERPNext to process the transfer of raw materials to the subcontractor.

• When this is checked, ERPNext assumes that there is a BOM (Bill of Materials) for the completed item and that raw materials are in stock. These materials are subsequently followed as issued to the subcontractor.

• When the manufacturing is done by the supplier, a Purchase Receipt is made to receive the completed item. ERPNext now reverses the issue of raw materials from your inventory and records the completed item as received.

This functionality is especially helpful for business firms that outsource segments of their production process and wish to precisely monitor supplied inputs and received outputs.

In order to enable and set up this feature fully, you may refer to the comprehensive subcontracting documentation found in ERPNext.

3.7 Items Table

The Items Table for Purchase Invoice is where you set all the products or services that you are buying from the supplier. In this section, you can enter item information manually or by scanning barcode, and allow you to set pricing, tax, accounting, weight, and much more. Below is an explanation of each primary field and functionality accessible in the Items Table:

• Scan Barcode: If you are operating a barcode scanner, you can easily add items to the Items Table by just scanning their barcodes. You save yourself from having to manually search and click on items from the Item master, which is very helpful in busy warehouses or procurement setups. To find out how barcode tracking functions in ERPNext, you can check the specific documentation on barcode-based item entry.

• Item Details (Code, Name, Description, Image, Manufacturer): Whenever you pick an item in the table, ERPNext will automatically pick up the Item Code, Name, Description, Image, and Manufacturer details from the Item master. This makes sure that you are using the same product information for all your transactions. If the item has a specific manufacturer assigned, that will be shown here as well.

• Quantity and Rate: Choosing the Item Code will automatically bring with it its default UOM (Unit of Measure) and description. The UOM Conversion Factor defaults to 1, so you take the UOM as is. If, however, the supplier carries the product in a different unit (e.g., boxes rather than pieces), you can modify the conversion factor accordingly.

The rate for the item can be taken from various sources:

- **Price List Rate**: Taken from the chosen price list if basic buying rates are established.
- **Last Purchase Rate**: Represents the price from the latest Purchase Order for the identical item.
- **Item Master Rate**: If a rate is established in the item master, it will be utilized as the default.

You can also use Item Tax Templates here to determine taxes particular to each item.

• Discount on Price List Rate: You can offer a discount either as a percentage or a fixed amount on the Price List Rate. This discount is applied per item and is useful for promotional pricing, bulk purchase reductions, or negotiated supplier terms. For detailed use, refer to ERPNext’s documentation on Applying Discounts.

• Item Weight: If weight information is stored in the Item master, ERPNext will pick up the Weight per Unit and Weight UOM automatically. Otherwise, you can enter the weight manually to get proper shipping, freight, or compliance.

• Accounting Details: Each product can be assigned to a specific **expense account, which determines where its cost will be tracked in your books. You can override this field if the default account is not the best fit for the purchase at hand, such as routing IT hardware to a capital asset account rather than an expense account.

• Deferred Expense: If an item's expense is to be allocated over several future months instead of being fully booked at present, you can check the Enable Deferred Expense box. This assists in expense amortization and will be beneficial in the case of prepaid services, software licenses, or extended maintenance contracts. More about this in ERPNext's Deferred Expense documentation.

• Allow Zero Valuation Rate: In rare cases where the Valuation Rate of the item is zero—such as free samples or agreed-upon free-of-cost supplies—you can tick the Allow Zero Valuation Rate checkbox. This allows the system to accept and submit the entry even if the item has no monetary value. It is useful in testing, promotional campaigns, or sample transactions.

• Bill of Materials (BOM): If a Bill of Materials is specified for the item in Item Master, it will be displayed here for reference. This is especially useful in subcontracting or production cases where the item's components are critical for material tracing or quality checks.

• Item Tax Template: You can set an Item Tax Template for each item to apply particular taxes according to the item's tax class, area, or vendor agreement. This allows per-item taxation instead of an overall rate for the entire invoice. ERPNext will compute and apply the proper tax percentage accordingly. To learn more about this feature, see the Item Tax Template guide.

• Page Break: The Page Break checkbox is for printing. When checked, ERPNext will advance to a new page before printing this item on the PDF or printed invoice. This is helpful when there are specific items or categories that must be printed separately on different pages to improve formatting or presentation.

Update Stock

If you want the inventory to get updated automatically when you create a purchase invoice, then mark the Update Stock checkbox. This saves an extra round trip, making a purchase receipt, thereby simplifying the process and making it faster

However, this should be done only when you have received the goods physically because the stock gets affected directly. Accuracy is very important here to avoid mismatching of the inventory records.

3.8 Taxes and Charges

In a purchase invoice, charges and taxes are crucial in establishing the amount payable. They are automatically pulled from the associated purchase receipt or purchase order. This maintains consistency in documents and saves time in not having to input the data again.

• Taxes Table: The system picks up all the taxes you are entitled to charge based on your set Purchase Taxes and Charges Template. You can check or adjust the values herein according to the deal with your supplier.

• Manual Edits: If need be, you can manually edit the rows of the tax table to charge custom rates or add/subtract specific charges.

• Tax Total: The tax total is automatically calculated and displayed under the table, adding to the invoice's Grand Total.

• Tax Category: To automatically assign tax, you can leverage a tax category, which pre-sets tax rules depending on conditions such as item group, supplier, or region.

To set up tax templates and auto-tax logic, go to the Purchase Taxes and Charges Template documentation.

Shipping Rule

If necessary, a shipping rule can be utilized to compute and add freight or logistics fees on the invoice. It is distance-based, weight-based, or condition-based.

• It guarantees the invoice displays the actual landed price of the items.
• Go to the Shipping Rule page for complete configuration and examples.

3.9 Additional Discount

In addition to item-level discounts on each item, ERPNext permits the application of a global discount to the entire purchase invoice.

• Discount Application: It can be a fixed amount or percentage.

• Based On: Select if the discount is to be based on:

  • Net Total (before tax and charges), or
  • Grand Total (after tax and charges).

This is used for bulk prices, special vendor deals, or seasonal discounts.

For efficiently applying discounts and understanding pricing rules, go through the Applying Discount guide.

3.10 Advance Payment

In cases where the suppliers need a fraction of the payment in advance (in case of high-value products), ERPNext has functionality to handle advance payments within the purchase invoice.

• Retrieving Advances: Click on a "Get Advances Received" button. It will then provide a dialogue where you can retrieve payment entries made to the supplier.

• These advance payments will subsequently be offset against the invoice amount.

• If there's an excess or mismatch advance, ERPNext lets you monitor and deal with the variance in the supplier account.

Go to the Advance Payment Entry page to discover how to record and associate advance transactions.

3.11 Payment Terms

At times, rather than paying the entire amount at once, the supplier and your company can settle on a payment plan in the form of installment payments over time. The well-planned payment plan goes by the name Payment Terms.

• Automatic Fetching: Should Payment Terms already be specified on the connected Purchase Order, they will automatically be fetched into the Purchase Invoice.

• Custom Schedule: You can also manually set the due dates and respective amounts/percentages in the invoice.

• Clarity in Payments: This keeps both parties on the same page in terms of how much will be paid and when, which aids in effective cash flow management.

Find more information on custom schedule setup on the Payment Terms documentation page.

3.12 Write-Off

At times, the customer or supplier is paid a little less than the invoice value, typically because of rounding, bank fees, or small differences.

• What is Write-Off?: This small difference can be written off so that the invoice is not kept open for insignificant values (e.g., ₹0.50 or $0.10).

• Automatic or Manual: Either ERPNext will automatically write off small differences, or you can do it manually while entering the payment.

• Accounting Accuracy: This will keep your books in balance and tidy, free from small receivables or payables outstanding.

Go to the Write-Off part of Payment Terms for additional configuration tips.

3.13 Terms and Conditions

Business transactions usually have particular Terms and Conditions (T&C) stipulating the liabilities, timelines, charges, return policy, etc., contracted between buyer and supplier.

• Preset Templates: You can create and store several T&C templates, which can be used subsequently by you on your purchase invoice.

• Auto-Fill: In case a purchase order with T&C is referenced, it will automatically fill in this field in the invoice.

• Print Visibility: These conditions will appear when printing the invoice, ensuring legal clarity and proper documentation.

For details on setting and managing terms, refer to the Terms and Conditions page.

3.14 Printing Settings

ERPNext offers several customizable print settings to personalize and organize your purchase invoices.

Letterhead

• You can configure your company’s official letterhead to appear on the printed invoice.

• This helps maintain a professional appearance and brand consistency.

Discover how to upload and use a company letterhead on the Letterhead page.

• Group Same Items

  • If the same item appears more than once in the invoice (e.g., inadvertently added or included from several linked documents), checking this box will group those entries into one line in the print view.
  • This makes the invoice more succinct and easier to read.

Print Headings

The default title of a document (such as "Purchase Invoice") may be customized on print using a print heading.

You may create new headings from:

See the Print Heading documentation to know more.

3.15 More Information

• Is Opening Entry: If you're upgrading your accounting system from some other ERP to ERPNext and want to enter historical data during mid-year, you might have to identify some documents as Opening Entries. In the instance of a Purchase Invoice, checking the "Is Opening Entry" box instructs ERPNext that this invoice is included in your opening balance configuration and is not an actual transactional purchase. This is particularly helpful at the time of ERP migration when it enables you to update your accounts with previously outstanding supplier balances. When designated as an opening entry, this document will not impact your financial statements as a current period transaction but will rather be used to get your books in sync with the data under the old system.

• Remarks: The remarks field is where you can include any other information or internal comments pertinent to the purchase invoice. This field is particularly ideal for capturing clarifications, payment terms, communication remarks, or any other detail not specified elsewhere on the form. These remarks are retained with the document and can be accessed by any authorized user for future reference, enhancing transparency and documentation within the company.

3.16 After Submitting

After submitting the **purchase invoice, ERPNext allows you to take several follow-up actions directly from the invoice. These actions remove manual entries and errors from the post-invoicing activities and automate them.

You can create the following documents against the submitted purchase invoice:

• Journal Entry: Generate automatic accounting entries in case any manual adjustments are required.
• Payment Entry: Post full or partial payments received by the supplier.
• Payment Request: When the payment is not to be done yet, you can make a formal payment request to your finance team.
• Landed Cost Voucher: If there are extra expenses like freight, customs, or insurance, you can distribute them proportionally among received goods using a Landed Cost Voucher.
• Asset: When the purchased goods are capital assets, you can directly turn them into fixed assets from the invoice.
• PI Submit: This ensures that the Purchase Invoice has been properly entered and the corresponding action can now be initiated.

All of these alternatives facilitate deeper workflow automation and accounting standard compliance.

4. More

4.1 Accounting Impact

In ERPNext, not only is a purchase invoice a record of what you owe your suppliers, but it also directly affects your company's general ledger (GL). For every item you have listed in the invoice, you need to decide whether the cost should be posted to an expense account (like for consumables or services) or an asset account (like for capital equipment).

You can also define the cost center associated with each line item to track spending by department or project. These settings can be customized at multiple levels: the item level, the company level, or directly within the invoice. Proper configuration ensures accurate financial reporting and budget analysis.

Upon submission, ERPNext creates the following standard double-entry accounting transactions:

• Debits

  • The expense or asset account linked to each item row (excluding taxes).
  • Any relevant tax amount (debited as an input tax asset or expense, depending on your tax configuration).

• Credits

  • The supplier account is credited with the full amount due, which is the incurred liability.

These postings keep your books in order and traceable, with a clean audit trail of financial commitments and apportionments.

4.2 Accounting When "Is Paid" is Selected

If you check the "Is Paid" box while making the Purchase Invoice, ERPNext considers that the supplier has been paid already at the time of the invoice. This option is often used in cases like cash purchase or advance settlement. When this is checked, ERPNext makes another set of accounting entries along with the normal purchase transaction:

• Debits: The supplier account is credited to match the liability, which means no balance is owed.

• Credits: The bank or cash account is credited to account for the payment going out.

These additional journal postings ensure that your cash account and supplier balances are updated in real time. To see the accounting effect of the transaction, just click on "View Ledger" once the invoice has been submitted. This gives complete visibility of all debits and credits created and guarantees transparency and accuracy.

4.3 Is a purchase an "expense" or an "asset"?

When creating a purchase invoice, be mindful of whether the item purchased is to be categorized as a purchase invoice or an asset, since it will directly influence your accounting treatment.

If it is consumed upon being purchased or is a service (e.g., phone bill, internet fees, or travel allowance), then the purchase will be accounted for as an expense. These expenses are accounted for as being consumed when paid, and their value does not remain on your company's books.

However, when it comes to inventory items, the acquisition is not identified as an immediate expense. Rather, it's accounted for as an asset as long as the item is in your warehouse or inventory. These items maintain their value until they're used or sold.

• If the inventory item is a raw material, then it's an asset until it's used in production, at which time it becomes an expense.

• If the product is bought with resale intention, it is an expense only upon delivery or shipment to the customer.

This understanding enables proper financial reporting, correct cost center allocation, and more transparent inventory valuation and operational costs.

4.4 Deducting Taxes at Source (TDS)

In most nations, including those whose taxation systems are stringent, companies are required by law to deduct taxes at source (TDS) when paying suppliers. The exercise guarantees tax payment on behalf of the supplier and is regulated by tax laws in each country.

Tax deduction plans, in most cases, operate on a percentage rate and are only applicable when:

• The aggregate billing by the supplier exceeds a stipulated amount, and

• The type of goods or services provided is in the taxable category.

In ERPNext, this is managed by setting up a distinct tax account, typically a head under "Tax Liabilities" or similar in your Chart of Accounts. When you process the invoice, you will **debit this account with the percentage being deducted and credit your supplier with the net amount payable. The withheld tax is then paid to the government, satisfying your business's tax liability.

This mechanism supports regulatory compliance, keeps your supplier records clean, and is fully integrated with ERPNext's tax and accounting engine.

4.5 Hold Payments for a Purchase Invoice

ERPNext offers two different methods of temporarily or permanently holding payment against a purchase invoice, allowing maximum flexibility in managing financial commitments with suppliers. The two options available are

• Explicit Hold
• Date Span Hold

Explicit Hold

An explicit hold places a purchase invoice on hold forever, i.e., the system will keep blocking any payment action for the invoice until explicitly unblocked. This is helpful where there is a problem with the supplier, missing papers, or any other problem that needs checking before payment.

To put on an Explicit Hold, navigate to the "Hold Invoice" sub-section of the Purchase Invoice form and just tick the "Hold Invoice" box. You also have a "Reason for Putting On Hold" text box where you have to put a note explaining the reason why this invoice is put on hold.

If the purchase invoice has already been submitted, you can still put it on hold. To do this, select the "Make" button in the top right corner and choose "Block Invoice." A dialogue will appear that asks you to enter a comment for the hold. Once you've input the comment, click "Save" to apply the hold.

Date Span Hold

The date span hold allows you to suspend payment for a fixed period. This method is helpful when you want to delay payment until a specific future date, such as pending goods inspection or awaiting internal approval.

To place this hold, go to the "Hold Invoice" option on the invoice form and mark the "Hold Invoice" box. A prompt will request that you specify a Release Date—the date when the hold will automatically be released. After entering, click "Save" to engage the hold.

You may modify the release date subsequently if necessary, provided that the invoice is not yet paid. To accomplish this, go to the "Hold Invoice" dropdown and select "Change Release Date." A dialogue will ask you to enter the new date and add a comment that justifies the modification.

Important Notes: Purchase invoices that are held will not be included in the References Table of a Payment Entry to avoid errors in disbursement.

• The release date must not be in the past—only future or present dates are valid.
• You can only unblock or block an invoice if it has not been paid yet.
• In the same vein, the release date can only be modified if the invoice is unpaid.

This two-hold scheme enables companies to exercise control over their payables so that payments are only made when suitable conditions have been fulfilled.

4.6 Provisional Accounting for Expenses (Only for Non-Stock Items)

In most real-world situations, companies might incur the related cost when a service is obtained but prepare the purchase invoice for the same in the subsequent accounting period or month. This leads to a mismatch, as the expense is not seen in the current month's financial statements, such as the profit and loss statement, as the system reflects the expense only when the invoice is entered.

To make sure that such unbilled but incurred expenses are accounted for in the proper accounting period, ERPNext has a feature known as Provisional Accounting, which enables you to align your books more precisely.

Steps to Set Up Provisional Accounting:

• 1. Turn Provisional Accounting ON in Company Settings: Start by enabling the Provisional Accounting option from the Company master. Once it is enabled, you need to set up a default provisional account as well. This is a temporary ledger that holds the expense amount until the actual invoice is posted. It normally falls in the liabilities section of your chart of accounts.

• 2. Make a Purchase Receipt for a Non-Stock Item: Once you've activated the setting, go ahead and create a Purchase Receipt for a Non-Stock Item (as provisional accounting applies only to non-stock items such as services). When you post this purchase receipt, accounting entries will automatically be passed to account for the provisional expense.

• 3. Accounting Entries on Posting of Purchase Receipt: When submitting the Purchase Receipt, ERPNext makes temporary accounting entries. These entries make the expense appear temporarily in the expense account and offset it with a credit to the Default Provisional Account, so the expense will appear in financial statements even before an invoice is made.

• 4. Create a Purchase Invoice Against the Purchase Receipt: When you receive the actual purchase invoice later, you make it by associating it with the previous purchase receipt. When you submit this invoice, ERPNext will reverse **final accounting entries in the usual manner—crediting the expense and debiting the supplier's account.

• 5. Reversal of Provisional Entries: When the Purchase Invoice is posted, the system automatically reverses the provisional entries that were entered at the Purchase Receipt level. This is to ensure that your books are not double-stated or replicated and that all expense figures are in line with the actual invoice.

With the help of provisional accounting, businesses are able to obtain **proper monthly accounting for expenditures even when the billing is pending, and thus financial reports better depict the real utilization of services within the period.

5. Related Topics

• 1. Sales Invoice
• 2. Item Wise Taxation
• 3. Payment Entry
• 4. Payment Request
• 5. Request for Quotation
• 6. Purchase Order
• 7. Purchase Receipt

7. More To Follow

• Zikpro ERPnext Demo

• www.zikpro.com