What is a Purchase Requisition and Why It Is Important for Your Business

We have written many articles on purchase orders, but one key term that causes confusion and mixup is purchase requisitions. This article will highlight the differences between purchase requisitions and purchase orders, and why purchase requisitions are imperative in your organization.

Purchase Requisition vs Purchase Order – What is the Difference?

Purchase requisitions are a document used when an employee needs to make a purchase or an order request on behalf of their company. It is a document that is used to inform department managers or the purchasing officer of the decision so that the purchasing department can start the purchasing process. The finance team will also use this document to coordinate reporting procedures with the accounting department as well.

Purchase orders are issued by the purchasing department after a purchase requisition has been made and passed the approval process. They are documents sent from a buyer to a supplier with a request for an order, and are a legally binding document.

Everything You Need To Know About Purchase Orders
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The Importance of a Purchase Requisition in a Business Organization

In any business organization, there is always the need for supplies or materials and equipment, these may be office supplies, consumables, machines and other equipment.

What is likely to happen when a business organization allows departmental managers to place orders directly with the suppliers? The answer is that there is a likelihood of fraud. To prevent this, a procurement department is often created to place the orders with the vendors and to oversee purchase requisition workflow. Within this department, there is a purchase requisition process in place to be followed to ensure that fraud is prevented, and the business organization gets value for its money.

One of the internal documents that are used in the department for a requisition order is a purchase requisition form. Using this process, the procurement department does not order goods directly from the vendors, rather there has to be a formal purchase requisition form from a given department, in this case, one where a given supply will be used, and then an approval process is followed, giving the company internal control over the purchase requisition process.

For example, the finance department may be interested in buying new financial software to make their work easier and improve security. The head of the finance department or the person whose role is requisition will make a formal request for the software. He or she will not do this by word of mouth, there has to be some tangible documentation in the form of the purchase requisition. It is on the strength of this document that the purchasing department will initiate the procurement process until the finance department acquires the new system.

In this case, the purchase requisition is a formal document that is used by department managers to make a request for materials which are needed. Upon materials running low, the departmental manager fills out the requisition form, indicating the quantity required, as well as some details about the order as well as the vendor. When the purchasing department receives the requisition form, they are supposed to go through it and take action. The action can be approval, alteration or even denying the request, but in this case, they must give reasons as to why they have arrived at this decision. Approval of the requisition gives the department the authority to create a purchase order, which is basically an order, to be sent to the vendor notifying them of the intention to make a purchase.

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