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What is a Purchase Requisition in the Procurement Process?

What is a Purchase Requisition in the Procurement Process?

The business world is vast, and the role documents play in keeping a business running can not be overemphasized. Given an exhaustive list of common business documents, Purchase Requisitions are essential documents in procurement processes.

The business world is vast, and the role documents play in keeping a business running can not be overemphasized. Given an exhaustive list of common business documents, Purchase Requisitions are essential documents in procurement processes.

Sadly, many business owners and team members don't know the difference between a purchase requisition and a purchase order. Many suppose both documents serve the same purpose.

Both documents allow business owners and teams to make budgets, plan purchases, and provide proof of funds spent if needed, especially in cases of internal audits. Each document serves an entirely different role. 

However, since most business owners are unfamiliar with each and how it is used, they either misuse them or neglect using them altogether. 

This article focuses on the purchase requisition, the difference between a purchase requisition and a purchase order, and how a purchase requisition can be used in the procurement process. 

Without further delay, let us get into the brass tacks of a purchase requisition. 

What is a Purchase Requisition?

A purchase requisition is a formal document used by employees of any organization to request the purchase of goods or services on behalf of an organization. 

Once a purchase requisition is filled by an organization's employee, it is forwarded to the appropriate quarters. This could be the purchasing staff of a department or the department managers. 

The document informs the approving personnel of the need to purchase goods and services while securing internal approval and igniting the procurement process. 

Before a purchase requisition can get the required approval, the document must outline the necessary details. They include:

  1. Description of goods and services 
  2. Quantity required
  3. Price 
  4. Name of vendor
  5. Name and department of purchaser
  6. Signature of purchaser and date


Once the procurement process begins, a purchase requisition does not become useless. The finance department will use the document to collate a detailed report sent to the accounting department, and a copy is kept for record purposes. 

Note that even after a purchase requisition has been approved, the document never leaves the organization since it is mainly used to seek permission to purchase goods and services. A purchase requisition is not legally binding. 

Since a purchase requisition is not legally binding, not all organizations use a purchase requisition document in their procurement process. Some businesses use what is called a Purchase Order(PO).

What is a purchase order, and how is it different from a purchase requisition?

Purchase Order and Purchase Requisition: What is the Difference?

A purchase order(PO) is a document that provides the full details of a purchase. Once a purchase requisition is approved, the purchasing department then creates a purchase order using the requisition received. 

An organization that does not use a purchase requisition will use a purchase order form to get a purchase approval. Once the vendor receives an approved purchase order, the document becomes legally binding, making a purchase order an external document.

Contained in a purchase document are instructions and details a vendor needs to know to complete the order. These details include;

  1. The company's name
  2. The name of the employee making such an order
  3. Quantity of goods and services
  4. Price
  5. The date the document was created
  6. Terms and conditions of payment
  7. Vendor's name and signature of all parties.


Now that we know what each document is and their differences let us discuss why a purchase requisition is important.

Why is a Purchase Requisition Required?

In every organization, purchases of consumables, raw materials, office supplies equipment, and services are inevitable because purchasing these items is constant. 

Once these necessities are depleted, asking department managers to place orders with vendors and suppliers directly can increase fraud and fund misappropriation cases. 

In view of this, most companies deem it fit to have a procurement department that takes care of the whole procurement process. This process curbs fraud and creates an efficient workflow that provides accountability for each penny spent.

The purchase requisition form is a document that makes the above possible. Ensuring the due process is followed, the purchase requisition form starts the purchasing process. 

If any problems arise before procurement, the document serves as proof of internal communication in an organization. 

In a company that uses purchase requisition, everyone's accountability from department heads to other team members and employees is ensured because of paper trails left by purchase requisition forms.

No employee can procure things on the company's account for personal use, as every dime is well accounted for before and after procurement.

Who Should Approve Purchase Requisition?

When a purchase requisition is made from any department of a company, the form is to be submitted to the head of the department who vets the purchase requisition, approves it, and forwards it to the procurement department for final approval.

Once the procurement department grants the final approval, a purchase order is drawn and sent to the supplier, and the necessary goods and services are procured.

Procurement Automation is the Way to Go

As the need for more goods and services increases in a company, so does the need for more purchase requisition and POs. 

Instead of leaving a huge pile of papers, it is wise that companies make their procurement forms automated as they greatly benefit from doing so. 

Because the whole procurement process can be very tedious, employees may lose track of forms or waste a great deal of time that could be invested in more productive ventures. 

Many documents may never be found when needed due to ill-documentation or even fire outbreaks in many cases. One of the easiest ways to take care of repetitive and mundane tasks from procurement processes is by imploring procurement automation.

Conclusion

Since purchase requisition and purchase order are vital parts of a procurement process, you need a less complicated workflow and a compact automation solution to cover procurement operations.

When the purchase requisition and purchase order forms are automated, all parties benefit from the ease of use, time, and efficiency. Indeed, you will do better if you automate the procurement workflow in a lean way with AhoyTeeam in Slack.


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