From PO to Paid: A UK Guide to the PO and Invoice Process

Late payments cost the UK economy almost £11 billion a year. Their impact spans the entire business, from cash flow and supplier relationships to delivery schedules and team time allocation. 

One of the most effective ways to reduce friction and speed up payment processing is to review the PO and invoice process. 

A well-run purchase order-to-invoice process links PO creation and goods receipts (GRN) to invoice capture, matching, and approval, and extends the same discipline through to posting, payment and archiving. 

In this blog post, you’ll learn what a complete PO-to-paid workflow includes, how 2-way and 3-way matching reduce errors, and where automation can remove manual hand-offs without weakening financial control.

Table of contents

• What does the PO-to-invoice process encompass?
• Documents and approvals in the PO to invoice process
• The PO to invoice process step-by-step
• Manual vs automated PO and invoice process
• Key controls in the PO and invoice process
• PO-to-invoice benefits that finance teams can measure
• Getting started with a PO-led invoice process
• UK PO-to-invoice case study: Stuart Plumbing & Heating Supplies
• FAQ

What does the PO-to-invoice process encompass?

The PO to invoice process covers everything that happens between raising a purchase request and making a supplier payment. In UK organisations with structured procurement and accounts payable (AP) processes, it usually follows a standard sequence:

Requisition → PO issue → delivery & GRN → supplier invoice → 2-/3-way matching → approval → posting → payment → archive

PO invoicing keeps records accurate by separating commitment from payment: the PO confirms what was approved, and the invoice completes the transaction.

Documents and approvals in the PO to invoice process

An effective PO invoice process depends on three things working together: 

1. The documents (artefacts) that carry the data
2. The people and roles responsible for each step
3. The systems that link each step in the process together. 

Most delays come from gaps between these elements — a missing document, an unclear owner, or a system that can’t give AP access to the information they need when they need it. 

Artefacts

Artefacts are the documents that move through the process and form the basis for matching, approvals and audit evidence. In a PO-led flow, these typically include:

• Purchase order (PO)
• Goods receipt note (GRN) or delivery note
• Supplier invoice
• Credit notes

Roles

Establishing clear roles stops invoices from sitting in limbo. In organisations with structured procurement and AP processes, responsibility is usually split across several functions:

• The requester, who initiates the need
• The buyer, who raises and issues the PO
• The goods receiver, who confirms delivery or service completion
• The budget holder, who approves spending
• Accounts Payable, who manage capture, matching and posting
• Named substitutes, who keep approvals moving during absence

Systems

The final element in the PO and invoice process is the technology that connects procurement, finance and payment. Typical systems may include:  

• An ERP or procurement software (for example, Sage 200) to manage POs, GRNs and posting
• A document management system to capture invoices, route approvals and store audit-ready records
• Banking systems to execute payments via BACS, CHAPS or Faster Payments 

When artefacts, roles and systems are aligned, the purchase order to invoice process runs smoothly, and it becomes easier to respond to supplier, auditor and internal stakeholder questions.

The PO to invoice process step-by-step

Looking at the purchase order and invoice process in sequence makes it easier to see where information enters the flow and how it’s carried through to payment. 

1. PO creation and approval in ERP or procurement

The process begins when a requisition or purchase order is raised. At this point, the PO should capture supplier details, items or services, quantities, pricing, delivery terms and a unique PO number. This is also the right stage to apply cost centre, general ledger (GL) and VAT coding.

The PO moves through the organisation’s approval matrix, which covers spend thresholds, segregation of duties and budget checks, before being issued to the supplier as the shared reference.

2. Good receipt (GRN) recorded 

When goods are delivered or services are completed, the receipt should be recorded against the PO. This usually involves confirming condition and quantities, and attaching a delivery note or service confirmation.

Until it’s recorded, invoices linked to those PO lines may remain pending matching or approval. When receipts are entered promptly, AP can match invoices against goods received.

3. Invoice capture 

Supplier invoices enter the process through a controlled intake, such as a central mailbox, portal or EDI feed. Having a single entry point makes it easier to manage volume and apply consistent standards.

Invoice data capture using optical character recognition (OCR) or intelligent document processing (IDP) automatically extracts key fields such as supplier, PO number, dates, amounts and VAT. Validating this data against supplier master records can reduce issues later in the process.

4. 2-way and 3-way matching

In a 2-way match, the invoice is checked against the PO to compare quantities, prices, totals and tax within defined tolerances. In a 3-way match, it’s also checked against the goods receipt or contract. 

Any variances, missing references, or potential duplications are flagged for review and resolution.

5. Exception handling 

When a mismatch or missing reference is detected, the invoice should be automatically routed to the appropriate owner — usually the buyer or AP — with sufficient context to resolve the query. That includes sharing related documents, details of the variance, and any notes from earlier steps.

Time-based reminders and escalations help prevent delays, with notes and adjustments recorded so the invoice can be re-matched and cleared.

6. Approval and posting to ERP 

Once an invoice matches cleanly or an exception has been resolved, it moves to final approval. Depending on your organisation, this may involve desktop or mobile approval and, where required, electronic signatures.

After approval, the invoice is posted to the ERP with confirmed coding and VAT treatment. Linking the posted transaction back to the source documents can save time later if questions arise around a specific payment.

7. Payment via BACS or CHAPS

Approved and posted invoices are queued for the payment run. Payment files are generated for BACS or CHAPS, remittance information is included, and payments are executed. Payment status and dates are then written back to the ERP, aligning the vendor ledger with bank activity.

Using consistent references simplifies reconciliation and reduces follow-up work if suppliers query payment status.

8. Archiving and retention 

The final step in the purchase order to invoice process is to store the complete document set together: PO, goods receipt, invoice, approvals and remittance information.

Keeping these records in a secure, searchable archive with appropriate retention policies supports VAT requirements and enables future retrieval. It also means finance and AP teams aren’t dependent on shared drives or inboxes to reconstruct processes months later.

Manual vs automated PO and invoice process 

As invoice volumes increase, the way your PO and invoice process is handled makes a noticeable difference to cash flow. Here’s a comparison of manual versus automated invoice handling:

Key controls in the PO and invoice process 

Most finance teams already have some form of processing controls in place, but these aren’t always applied consistently across PO creation, invoice intake and payment.

A “No PO, No Pay” policy is one of the simplest ways to tighten that link. When suppliers are expected to quote a valid PO number on their invoices — with defined exceptions for spend that sits outside the PO flow — fewer invoices arrive without the context AP needs to process them.

Tolerance rules also help progress invoices. Small differences in price, quantity or freight can be approved automatically, while anything outside those limits is flagged for review. Used alongside segregation of duties, tolerances allow routine invoices to pass through approval without opening the door to self-approval or inappropriate overrides.

Supplier onboarding is another opportunity to increase control. For example, standardising PO number formats and invoicing requirements reduces avoidable errors before invoices reach accounts payable.

At the payment stage, using clear BACS references helps reconciliation and follow-up. Consistent remittance information makes it easier to match payments back to invoices and respond to supplier queries without additional investigation.

PO-to-invoice benefits that finance teams can measure 

• Fewer errors and over-payments: Invoices are checked against approved POs and recorded receipts before payment, reducing pricing and quantity discrepancies.
• Shorter processing times: PO-backed invoices that match within tolerance can move through approval with little or no manual intervention, reducing overall cycle time.
• Lower exception volumes: Consistent PO references, receipt data, and matching rules reduce the number of invoices requiring investigation or follow-up.
• Stronger VAT and audit records: POs, GRNs, invoices, and approvals are stored together, making supporting evidence easier to retrieve.
• Fewer supplier payment queries: More predictable approvals and clearer remittance information reduce the volume of follow-up handled by AP teams after payment runs.

Getting started with a PO-led invoice process

If you’re ready to take a more structured approach, the six steps below outline how companies can successfully introduce a purchase order invoice payment process.

1. Decide which spend requires a PO 

2. Agree approval thresholds and matching tolerances 

3. Require valid PO numbers on invoices 

4. Align supplier onboarding with invoicing expectations 

5. Ensure ERP access for PO, GRN and posting 

6. Begin with a high-volume area 

Applying the process to a single category or supplier group makes it easier to review tolerances, approval routes and exception handling before wider use.

UK PO-to-invoice case study: Stuart Plumbing & Heating Supplies 

Stuart Plumbing & Heating Supplies is a UK plumbing and heating merchant with eight branches across the Midlands. As the business expanded, its small finance team was manually processing more than 2,000 supplier invoices a month, creating pressure around accuracy, period close and audit readiness.

To reduce manual effort and improve control, the business digitised its AP process with DocuWare Cloud and integrated ancora software for invoice capture and classification. 

Key improvements included:

• 30–40% faster invoice processing, reducing handling time significantly
• Month-end close brought forward by around 10 days
• Improved accuracy, with VAT and pricing discrepancies identified before payment
• Growth of more than 15% without adding finance headcount

With DocuWare Cloud, invoices and delivery documents are easier to retrieve, enabling audits and internal queries without manual searches. Mobile access also allows staff to view documents when working away from the office.

Read the full Stuart Plumbing & Heating Supplies Case Study.

FAQs

What should a UK PO and invoice process include to ensure on-time payment?  

A clear chain from PO creation and goods receipt to invoice capture, matching and approval, then ERP posting and BACS/CHAPS payment. The process should be backed by an approval matrix, tolerances and a “No PO, No Pay” policy.

What belongs in a "No PO, No Pay" policy? 

Supplier obligations to quote a valid PO number, defined exceptions (e.g. rent, utilities), approval routes for non-PO spend, and enforcement steps (holds/rejections) when the PO is missing.

How do tolerance thresholds work in the PO to invoice flow? 

Your company sets small, predefined limits (e.g., ±£/%) for price, quantity, or freight, so clean variances automatically approve. Anything outside tolerance triggers a review exception.

How are partial deliveries or split invoices handled? 

The GRN records what arrived; invoices can be matched pro rata to those lines, with any unmatched quantities held open until the remaining goods are received or the PO is amended.

How do service POs fit when there's no GRN? 

Use 2-way matching (invoice <-> PO) with tighter tolerances and require a service confirmation or contract reference; route variances to the budget owner before approval.

How do credit notes link into the PO and invoice process? 

Credit notes are attached to the original PO/invoice line(s) and offset in the ledger, keeping a complete audit trail of the correction.

How does BACS/CHAPSpayment integrate with the process? 

Once approved and posted, invoices are included in the scheduled payment run. Remittance references flow back to the ERP, enabling automatic reconciliation and marking items as paid.

Which KPIs show the PO to invoice process is working? 

Touchless match rate for PO-backed invoices, exception rate and ageing, approval cycle time, on-time payment %, duplicate rate, and first-pass success.

How do authority limits and approval thresholds apply? 

Amounts, categories and cost centres map to specific approvers in an approval matrix. Escalation rules and delegation ensure continuity during absence while preserving SoD.

How should we onboard suppliers to reduce mismatches? 

Share your PO number format and invoicing guidelines, require electronic delivery to a central mailbox/portal, and validate vendor master data (including VAT and bank details) before trading.

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