Purchase Requisition

A purchase requisition is a document that an employee of an organization issues internally to express their desire to purchase goods or services for the business. This document ensures a transparent procurement procedure, prevents fraud, and establishes direct control of finances over the buying and procurement process.

It is the first step in an organization’s purchasing procedure. An employee submits the purchase requisition form to the purchasing department for approval. After the internal review and approval, the company issues a purchase order to the supplier of the goods or services required. The purchases can be for manufacturing inputs, inventory, or business operations.

• The purchase requisition definition refers to a document internally issued by an employee to request the purchase of goods or services on their company’s behalf. It safeguards a business from fraud and helps an organization control its expenses.
• Typically, some of the details included in this document are the vendor’s legal name, item price and quantity, the department and name of the requestor, and the reason for purchase.
• Creating this document is the first step in an organization’s procurement procedure.
• Automating the purchase requisition procedure can eliminate the manual procedures that are susceptible to errors.

The purchase requisition definition refers to an internal document that an employee of an organization issues to request the purchase of goods or services. The first step in a business’s purchasing procedure begins with the issue of this document. It helps companies prevent fraud, control spending, streamline procurement, and offer crucial documentation required for financial audits.

Generally, a purchase requisition form consists of the following details:

• The requestor’s department and name
• Date of request 
• Requested products or services
• Price, description, and quantity of the item. 
• The supplier’s legal name
• Reason for purchase 
• Suggested supplier or vendor 

One must remember that employees do not buy anything when they fill out the document. They are merely initiating the purchase process by seeking internal permission. Also, these documents are not legally binding and rarely leave the company.

Not every organization uses this document in their procurement procedure. Some businesses need the document for purchases exceeding a specific dollar amount. Moreover, a company’s accounting document utilizes this document to make plans concerning future spending. This is helpful as checking the budget before approving purchases can prevent costly mistakes.

The steps involved in the purchase reacquisition procedure are as follows:

1. Fill out the purchase requisition form.
2. Get the document approved by the purchasing department.
3. Receive the quotation.
4. Issue a purchase order to the vendor.
5. Receive the delivery of the required items and check whether the quantity and quality are right. Make sure to process if necessary.

The last step of the purchase requisition process involves doing a three-way matching between the invoice provided, the purchase requisition, and the purchase order to ensure accuracy.

If businesses automate the purchase requisition workflows, they can eliminate the error-prone manual procedures that can be slow and burdensome.

Let us look at a few purchase requisition examples to understand the concept better.

Example #1

Westfall Technik adopted the predictive procurement software developed by Arkestro to extract savings and more dependable deliveries from a supply chain that has been historically challenging. Arkestro’s system works within the processes and systems that customers are already utilizing by setting recommendations on price and allotment into an organization’s purchasing and sourcing workflows.

The system does this by offering recommendations concerning predictive pricing suggestions at an item level to the purchasers for any bill of materials, purchase requisition, or market basket, which can be communicated directly to the vendors. Also, Arkestro can route the purchases to preferred vendors and automate the supplier-purchaser, thus saving resources and time.

Example #2

Suppose the sales department of Prudent, a life insurance advisory company, wants new smartphones for the field team members. However, instead of having the head of the department order 30 new phones or having the sales executives buy their devices, the purchasing procedure requires the sales manager to issue a purchase requisition and submit it to the purchasing department.

Once the purchasing department reviews the document and ensures the request falls within the organization’s current budget, it approves and issues a purchase order.

One can look at the following points to understand the importance of this document.

• It formalizes rules for who can buy what, how, and when. This creates clarity for managers, procurement groups, and employees regarding how they should handle purchases.
• This process ensures greater transparency regarding which individuals and groups buy what and why. Transparency is more when employees issue the document electronically.
• A well-enforced and clearly stated purchase process minimizes the scope for a rogue employee to collaborate with suppliers and defraud the organization or purchase goods for personal use.
• Issuing such a document prevents duplicate orders.
• Businesses can use this internal document as proof for financial audits.
• Since the purchasing department reviews the document, the purchase requests typically fall within the organization’s budget guidelines.

The meaning and purpose of purchase requisition and purchase order can be confusing for individuals who are not familiar with the concepts. To avoid any confusion, one must understand their critical differences. So, let us look at a table highlighting their distinct features.

This article has been a guide to Purchase Requisition and its meaning. Here, we explain its examples, differences from a purchase order, importance, and steps. You may also find some useful articles here -

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