Chapter Six — Spending: Procurement, Warehouse & Subcontracts

01 Before we start

In Chapters 4 and 5 we saw the cost and ledger figures. Here we see where they come from: three operational modules that spend the money — Procurement, Warehouse, and Contracts — all of which feed into "Cost Control" (Ch.4) and "Finance" (Ch.5).

02 Procurement: the purchase cycle

The module is titled "Supply chain". The cycle begins with a purchase request, then a request for quotes, comparison and award, then a purchase order, then receipt.

Module tabs

Nine tabs: Analytics · Purchase requests · Sourcing (quotes) · Purchase orders · Vendors (AVL) · Budget control · Supply tracking · Returns · Advance payments.

Purchase request (PR)

Request items from the catalog for a project and a need date; the system compares what's requested against the plan in the project and flags any overrun. After it is approved it can be converted into a purchase order. States: draft · approved · converted to purchase order · cancelled.

Inventory-aware purchase request (net required)

When raising the request, choose a Stock source warehouse (with the project) and enable Cover from stock on save; the system then shows three figures for each item: available in the warehouse, issued from stock, and to be purchased. On save, the available portion is issued from stock automatically (with a financial entry) and the purchase request is created for the shortfall only — and if stock covers the full quantity, no purchase request is created at all. Example: 600 required and 400 available ⟵ 400 issued and 200 purchased; 40 required and 60 available ⟵ 40 issued with no purchase.

Quotes (RFQ)

Invite several vendors (approved ones on the list are highlighted), enter their offers, and compare the bids side by side (the lowest price per item is highlighted), then award — the award creates one purchase order per vendor at the offered prices. States: draft · sent · pricing in progress · awarded.

03 The purchase order and three-way match

The purchase order is your commitment toward the vendor. From its page you track the "three-way match" that governs approval and invoicing.

Creation and approval

From scratch or by converting an approved request (or from a technical change): the vendor, currency, line items (item/quantity/price). The order is created in the Pending approval state; and approval records a commitment in "Budget control" (and cancellation releases it). States: pending approval · approved · partially received · received · cancelled.

Three-way match

On the order page, for each line item: ordered (from the order) · received (from the warehouse) · invoiced (from finance). The badge is "✓ matched / partial / pending". The vendor invoice is not approved for payment (Ch.5) except on a full match.

Price check and landed cost

A price indicator "✓ within ±5%" or a variance alert when the invoice differs from the order. And the landed cost (customs/freight/clearance) is added to the received unit cost later (per the inventory standard) — so the true cost appears.

04 Vendors and budget control

Two tabs govern the quality of spending: an approved vendor list, and a register that links purchase orders to the project budget.

Vendors (AVL)

Qualify vendors and maintain an approved vendor list and evaluate their performance (ISO 9001 style). For each vendor: a qualification grade, commercial data (registration/tax card/certificates/bank account), the committed spend against them, and exportable performance evaluations. Approval states: under review · approved · conditionally approved · suspended · rejected.

Budget control (commitments)

This is the bridge to "Cost control": for each project — budget · committed · received · invoiced · open commitment · uninvoiced (GR-IR) · available. The rule: committed = approved purchase orders; open commitment = committed − received; uninvoiced = received − invoiced; available = budget − committed.

Supply tracking · returns · advance payments

Supply tracking: expected vs received for each open order (overdue/on time). Returns: a return to the vendor (debit note) that reduces stock. Advance payments: an advance to the vendor settled later from its dues — and both post to finance automatically.

05 Warehouse: receipt and issue

The "Warehouse" module is a single page with four sections: the warehouses, orders awaiting receipt, the balance and inventory value, and the log of receipts and consultant inspection.

Receipt (goods receipt note / GRN)

From "Orders awaiting receipt" press "Receive": choose the receiving warehouse and the quantities of each item (not exceeding the remainder). A goods receipt note is created, and the stock enters at unit cost + landed cost. Consultant inspection: pending/approved/rejected — and rejected stock is excluded from inventory. Accounting-wise: inventory against a receipt clearing account.

Issue to a project

From the balance row choose "Issue to a project" and a quantity — so the actual cost (at weighted average) is charged to the project. Accounting-wise: project materials cost against inventory — and here is where the materials cost actually enters the project.

Transfer and valuation

Transfer between warehouses moves the quantity with no accounting impact. And valuation is by the weighted average method (average cost). Warehouses are of two kinds: central and site warehouse (linked to a project).

Reorder level and alerts

Each item has a minimum (reorder point) set from the editable Reorder level column in the balance table. When the balance falls to the level or below, the item appears in the Reorder alerts section with the amount of the shortfall and a Low badge. Issuing is always allowed (never blocked), but it highlights the item to replenish via a purchase request — and it integrates with the "inventory-aware request" above.

06 Contracts: subcontracts and the generator

The Contracts module (a standalone add-on) has two tabs: Subcontractor agreements and Owner and main-contractor contracts (the contract generator).

Subcontractor agreement

Create an agreement: the contractor (a party from your ledger), the project, currency, scope of work, the offered amount and the budget, the retention percentage, and the delay penalty %/day and its cap. The cycle: draft · pending approval · approved · cancelled.

Payment certificates and the quality gate

From the agreement page you issue contractor payment certificates (their calculation is in Chapter 4). Their cycle: submitted · audited · approved · paid · rejected. And approval or payment is blocked by an open non-conformance (NCR) or a blocking request for information (RFI) against the contractor. Approval posts the subcontract cost and retention to the ledgers automatically (Ch.5).

Contract generator owner and admin only

"Owner and main-contractor contracts": fill in the contract variables once (FIDIC 2017 style), choose the embedded documents and signatures, and a bilingual sealed PDF file is issued with a verification page. Document generation only — not tied to cost or the ledgers.

07 The spending ← cost ← ledgers loop

Every operational spending action produces a figure in "Cost control" (Ch.4) and an entry in "Finance" (Ch.5). This table ties the whole loop together.

08 Permissions — and the summary

The rule: operations (purchasing, receiving, issuing, agreements) are for editors (owner/admin/manager), and the viewer only reads. And the contract generator is for the owner and admin alone. And remember the two quality gates: approved samples are a condition for the purchase order, and non-conformances/blocking requests prevent payment of a subcontract certificate.