Compliance details last reviewed on 4 October 2026. Tax rules change often. This is general information, not tax or legal advice, so confirm specifics with your chartered accountant.
A site manager orders cement on a phone call. The invoice reaches accounts payable (AP) two weeks later, and nobody can say who approved the spend or whether the full quantity arrived. It is paid anyway, because the supplier is chasing and the month is closing.
That gap between "we needed it" and "we paid for it" is the procure to pay process. In India it carries two clocks that generic guides skip: payment limits for micro and small suppliers, and a 180-day limit tied to input tax credit.
This guide covers the workflow, the three-way match, the timing rules and a control checklist. It is one of the six workflows in our overview of B2B accounting workflows.
The procure to pay process in six stages
Procure to pay (P2P) runs from a purchase need to the supplier's money leaving your account. Each stage needs one owner, one control and one record.
| Stage | Owner | Control | Record |
|---|---|---|---|
| 1. Requisition | Requester | Budget and need stated | Purchase requisition |
| 2. Purchase order | Buyer, then approver | Approval by value up the manager hierarchy | Approved PO, with approver and time |
| 3. Goods receipt | Store or site receiver | Count and condition checked against the PO | Goods receipt note |
| 4. Invoice capture | AP | Invoice matched to a PO, supplier details checked | Invoice booked in the payable ledger |
| 5. Match and approve | AP, then approver | Three-way match within tolerance | Match result and approval |
| 6. Payment | Payer | Paid by due date, tax deducted where applicable | Payment, linked to the invoice |
The owners are deliberately different people. Under segregation of duties, the requester does not approve, the approver does not receive the goods, and neither releases payment. Small teams cannot separate every role, but approving the purchase and releasing the payment should never sit with one person.
PO approval thresholds up a manager hierarchy
A purchase order approval workflow asks one question before money is committed: does someone with enough authority agree to this spend?
The common pattern is value bands tied to the reporting line. The requester's manager approves small orders, above a set value it goes to that manager's manager, and above a higher value to a department or finance head. The bands are your policy, not a legal requirement.
Three design points keep this workable:
- Approve before you order. Approval after delivery is ratification, not a control.
- Cover absence. Name a dated delegate for each approver so orders do not stall during leave.
- Keep it in a system. An approval on WhatsApp or email cannot be produced when an auditor asks who authorised a purchase.
The three-way match
The three-way match compares three documents before an invoice is paid:
- The purchase order says what you agreed to buy and at what price.
- The goods receipt says what actually arrived, and when.
- The supplier invoice says what the supplier is billing.
If the invoice bills for 100 units, the order was for 100 and 92 were received, you should pay for 92 or hold the invoice until the gap is explained. Exact matching is rarely practical, so teams set tolerance rules: a small price or quantity variance passes automatically, and anything beyond it goes to a named person. Services have no physical receipt, so the usual substitute is the budget owner's confirmation that the work was done.
Why payment timing matters in India
Two India-specific rules turn payable ageing from housekeeping into a financial control. Both are secondary-source summaries, last reviewed on 4 October 2026, so confirm the current wording with your CA.
The MSME payment limit. Section 15 of the MSMED Act, 2006 is reported to require a buyer to pay a micro or small enterprise supplier within the period agreed in writing, which cannot exceed 45 days from acceptance of the goods or services. With no written agreement, the period is 15 days. Under the income-tax consequence, an amount owed to a micro or small enterprise beyond that limit is deductible only in the year it is actually paid. That was section 43B(h) of the 1961 Act. Under the Income-tax Act, 2025, in force from 1 April 2026, it is reported to sit in section 37, clause (g) of sub-section (2). Medium enterprises are not covered by this income-tax consequence.
The 180-day ITC rule. Rule 37 of the CGST Rules is reported to require you to reverse input tax credit if you have not paid the supplier within 180 days from the invoice date. The credit can be availed again once you pay. Separately, section 16(2)(aa) of the CGST Act allows credit only where the supplier's invoice details appear in your GSTR-2B, which is why AP and the monthly GSTR-2B reconciliation have to talk to each other.
The two clocks start from different events: acceptance of goods for the MSME limit, the invoice date for the ITC rule. A late receipt entry, or an invoice sitting in an inbox, can make a payment late before AP has seen it.
The practical first step is recording which suppliers are micro or small, and the agreed terms with each. Ask your CA how to evidence supplier status.
TDS also applies to many vendor payments; see our TDS guide for the Income-tax Act, 2025. Payment is not complete until the correct deduction is made and recorded.
Control checklist
Use this as a quick test of your own process. Each line should be a yes.
- Every purchase starts with a requisition or approved request, not a phone call.
- PO approval bands are written down and tied to named approvers and delegates.
- Goods or services are confirmed received before the invoice is approved for payment.
- Invoices are matched to the PO and receipt, with written tolerance rules.
- The requester, approver, receiver and payer are not the same person for any one purchase.
- Approvals are kept in a system with approver name and time, not in chat.
- Each supplier's status (micro, small or other) and payment terms are on record.
- Payable ageing is reviewed at least monthly, with items nearing a limit flagged.
- TDS is checked on each payment before release.
- Supplier invoices are reconciled to GSTR-2B before credit is claimed.
Common failures
- Approval after the fact. The PO is raised once the goods have arrived, so the control documents a decision already made.
- Receipts nobody reads. Receivers sign without counting, or the receipt never reaches AP.
- One person does everything. The same person creates the supplier, raises the PO and releases payment.
- Terms unknown to AP. Procurement agrees credit terms verbally, and AP pays on its own cycle.
- Ageing reviewed at quarter end. By then a micro or small supplier's invoice may be past its limit.
- Duplicates. The same invoice is booked twice, from an emailed copy and a courier copy.
Where OpsGrids fits
Some of this chain is live in OpsGrids and some is not, so here is the plain picture.
OpsGrids Operations records inventory items with reorder points, warehouses, and suppliers scored on lead time, on-time percentage and spend. It records purchase orders down to the line and goods receipt against them. Receiving and warehouses are available through the API, while their screens are still marked "coming soon" in the app.
OpsGrids Finance covers invoices, payments, GST returns, IMS supplier reconciliation and TDS withholding on a full ledger; its IMS workflow runs against a simulated GST portal today. Notification rules can send events, such as an invoice being finalised, to people on WhatsApp or email. Purchase orders have no approval step yet.
Two parts of the chain described above are not live today:
- Routing a purchase order above a threshold up the reporting line for approval. This is designed, not built. The one approval chain that works today is for attendance corrections.
- Reconciling a supplier invoice to a goods receipt. Finance reconciles against its own purchase book today. The receipt event is published, but nothing consumes it yet, so the three-way match is not automated.
No software guarantees compliance or on-time payment. Your supplier data, your terms and your CA's judgement still decide the outcome. The platform page explains how the ledger records entries.
FAQ
What is the procure to pay process? It is the chain from purchase requisition through PO approval, goods receipt, invoice matching and payment, with an owner, control and record at each stage.
What is a three-way match? It compares the purchase order, the goods receipt and the supplier invoice before payment. If quantity or price differs beyond your tolerance, the invoice is held and queried instead of paid.
Does the MSME 45-day rule apply to all suppliers? It is reported to apply to micro and small enterprise suppliers, with 15 days if there is no written agreement. Medium enterprises are not covered by the income-tax consequence. Confirm the current wording and your suppliers' status with your CA.
What happens to ITC if I pay a supplier after 180 days? Rule 37 of the CGST Rules is reported to require reversal of the credit when the supplier is unpaid after 180 days from the invoice date, and it can be re-availed on payment. Confirm the current position with your CA.
Talk to us about your purchase workflow
Want to see how this maps to your own approvals? Talk to our team for a walkthrough.
Sources (checked 4 October 2026)
- Micro, Small and Medium Enterprises Development Act, 2006, section 15 (msme.gov.in)
- Income-tax Act, 2025 and Income Tax Department FAQs (incometax.gov.in)
- PIB: Income-tax Act, 2025 comes into force, 1 April 2026 (pib.gov.in)
- CGST Act, 2017 and CGST Rules, 2017, section 16 and Rule 37 (cbic.gov.in)
- GSTN portal and FAQs on GSTR-2B (tutorial.gst.gov.in)