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Purchase Agreement in D365

Updated: Feb 24, 2022

Below written article will provide you great insight on Purchase Agreement in D365.

A Purchase agreement is a contract with vendors that commits an organization to buy a specified quantity or amount by using multiple purchase order over time.

In Exchange for this commitment by an organization, the buyer receives special prices and discount.

Purchase Agreement types in D365


Agreement Classification

Agreement Classification is a required field on the Purchase agreement form. Classification help organization to group agreement into different types. It will not change the purchase agreement types but only available for or used for reporting and analysis.

Path :- Procurement and sourcing > Setup > Purchase Agreements > Purchase agreement classification

Process Flow

1.Create Purchase Agreements

Path: - Procurement & Sourcing > Purchase Agreements > Purchase Agreements

Users need to select vendor as mandatory tab and fill other options such as Purchase agreement classification, document title etc. And then click on Ok

Click on Ok will open below page where Header & Lines concept are there as like other forms such Purchase order etc

Now lets a have a look on different type of Purchase Agreements

1. Product Quantity Commitment

In Product Quantity Commitment agreement type user will allow to enter or specify the quantity, Unit Price, and discount. Expiration date is a mandatory field for all the agreement types.

2. Product Value Commitment

In Product value commitment agreement type user will allow or specify to enter the value (Net amount) only and Other fields are greyed out. Expiration date is a mandatory field for all the agreement types.

3. Product category Value Commitment

In Product Category value commitment type, user will allow or specify to enter procurement category or its nodes along with value (Net amount) only and other fields are greyed out. Expiration date is a mandatory field for all the agreement types.

4. Value Commitment only

In Value Commitment type Company Procurement category is a default option in Procurement category, only User need to define Value only for the agreement.

In above all types of commitment “Product Quantity” and Value Commitment are most popular among organizations.

Other Important Setup or Policies for Agreements

In Line Details, General Tab

1-Max is enforced

The total quantity or amount for all order lines can’t exceed the quantity or amount that is specified on the related document

2- Release Limit

The Minimum release limit and Maximum Release Limit is defined other than zero then zero then the user will receive a warning that the line amount on the order is outside the range, however this will not prevent you from using the agreement

3. Price and discount are fixed

The price on an order line and the price on the related commitment must be the same. If the price is changed on the order line, the link to the commitment is broken. If the link is broken, the order line doesn't contribute to the fulfillment of the commitment

4. Fulfillment

Fulfillment tab help user to know the status of purchase agreement. Through this tab user can identify that how much quantity or amount are released, received, and invoiced.

The Agreement area shows the total quantity or the total amount that the sales agreement line is valid for.

And now after choosing the default commitment and agreement lines were defined user need to click on confirmation in Purchase Agreement tab

Now Lets confirm the Agreement

After choosing the default commitment and agreement lines were defined user need to click on confirmation in Purchase Agreement tab

Now Purchase agreement will change from Draft Stage to Effective

Now Lets Create Purchaser Order from Purchase agreement only by clicking on Release order and in Purchase Quantity enter the quantity want to order

As user click on create , system will Create PO with same quantity, rate and discount

Go to Purchase Order

Path :- Account Payable > Purchase Order > All Purchase Order

Path : Procurement and Sourcing > Purchase Order > All Purchase Order

Currently it’s a open order only. User need to check the mandatory things and click on Confirm

After Release of the PO , user can also the status in Fulfillment tab

In the Menu tab user can check how many PO are release through Purchase Agreements by clicking on Release Order Lines

Now let suppose out of 200 quantity, 80 Quantity Received in first slot.

In PO, User need to first Register the quantity executive is receiving, for this user need to click on Update line and click on Registration

It will open registration window, where user need to click on Add in Registration Lines fill the Register Now quantity column and click on confirm registration

After Confirmation, system will show the Registered quantity. User can close this form now

Now have to click on Product received in Receive tab

It will open below form and here user have to Registered quantity and after verifying the value, click on OK

Receipt Process is Completed now for 80 Quantity, now we can check in Purchase Agreement Fulfillment tab of the updated status. Here in Received Status its showing 80.

Now let perform the Invoicing for the PO and after that we will again check the Fulfillment status in purchase agreement

For Invoicing User need to click on Invoice in Invoice Tab

Here user need to enter Invoice Number, verify the quantity and click on Post

Now invoicing is complete, now lets again check the Fulfillment tab in Purchase Agreement

Here again now status is update, Remaining 800, Received 120 and Invoice 80 and Overall Quantity is 1000.

That all for this article


Hope you like it.

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