Delivering value through procurement can be challenging without the use of purchase requisition process. Depending solely on purchase orders can hold your team back as you scale. Having purchase requisition process helps you to gain visibility and enable employees to be part of the purchase activities.
Several businesses are unwilling to update their procurement process, even though it directly affects their bottom line. These organizations fail to understand that the more employees start involving in procurement activities, the less control and visibility they have on their spend.
To ensure spend visibility and eliminate maverick spending, businesses must streamline their requisition processes.
Here is everything you need to understand to streamline your requisition process.
A purchase requisition is an internal process used by employees or departments to request the purchase of goods or services. It serves as the first step in the procurement process, notifying the procurement or purchasing team of the need for specific items. The requisition process ensures that all requests go through proper channels for approval before converting them into purchase orders (POs).
A purchase requisition form includes details such as the requisition number, date, requestor's name and department, along with a list of requested items (e.g., software subscription), quantities, estimated costs, and total value. It serves as an internal document to seek approval before procurement. Below is the image of a sample PR form.
A purchase requisition is an internal request to procure goods or services, while a purchase order (PO) is a formal, legally binding agreement sent to a supplier. The requisition seeks approval before procurement, whereas the PO finalizes the transaction after approval, ensuring the order is fulfilled under agreed terms.
| Purchase Requisition |
Purchase Order
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| A formal request to obtain goods or services, initiated by an employee or department within an organization. |
A formal document issued by the buyer to the supplier, detailing the items to be purchased, including quantities and prices.
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| To seek internal approval and budgetary authorization before proceeding with a purchase. |
To officially authorize a purchase and create a legal contract between the buyer and supplier.
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| Employee or department in need of goods or services. |
Procurement or purchasing department based on approved requisitions.
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| Requires internal approvals from relevant departments (e.g., finance, management). |
Generally does not require further approval once issued, but must align with the approved requisition.
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| Description of requested items, quantities, estimated costs, and justifications for the purchase. |
Detailed list of items to be purchased, quantities, agreed prices, delivery dates, and terms of payment.
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| Initial step to ensure the need and budget for a purchase are validated internally. |
Subsequent step that finalizes the purchase decision and communicates it to the supplier.
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| Not legally binding; serves as an internal document. |
Legally binding; serves as a contractual agreement with the supplier.
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| Used for internal tracking and budget control. |
Used for external tracking, order fulfillment, and financial accounting.
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| No direct interaction; purely internal. |
Direct interaction with suppliers; specifies the terms of the transaction.
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| An employee requests new office chairs, detailing quantity and justification for approval. |
After approval, the purchasing department issues a purchase order to the supplier specifying the type, number, and price of the chairs.
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The purchase requisition process begins when an employee identifies a need for goods or services. The employee raises a purchase requisition, which is then submitted to the relevant department or authority for approval. Once approved, the requisition is converted into a purchase order, which is then sent to the supplier to fulfill the order.
The requisition moves through an approval process to confirm budget availability and compliance with procurement policies. This may involve department heads, finance, or procurement teams.
Finance ensures that the requested purchase fits within the allocated budget.
The procurement team evaluates the requisition, checks for preferred suppliers, or identifies sourcing requirements.
If the request aligns with budgets and policies, it is approved and forwarded for further processing. If not, it may be rejected or sent back for revision.
After approval, the PR may be converted into a Purchase Order (PO) for supplier engagement.
Organizations can build an accountable spend culture and maximize spend effectiveness through purchase requisition processes. It also greatly eliminate unapproved spending while enabling employees to be part of the purchasing process.
Purchase requisitions provide a systematic way to oversee and control spending within an organization. With purchase approval process, organizations can ensure that all expenditures are necessary and authorized. This control mechanism helps prevent unauthorized purchases and reduces the risk of fraud.
With a purchase requisition process in place, managing your budget gets lot easier. It ensure that all purchases are approved, tracked, and complaint with your procurement policies and budget constrains. Requisition approval process gives spend visibility and eliminate maverick spending.
Having a documented trail of all purchase requests is essential for accountability and transparency. Purchase requisitions create a paper trail that can be used for auditing purposes, ensuring that every purchase is justified and approved. This documentation helps in resolving disputes, tracking spending patterns, and maintaining compliance with internal and external regulations.
Purchase requisitions help streamline the procurement process by clearly outlining the need for goods or services before initiating a purchase. This helps in planning and organizing procurement activities, reducing delays, and improving the efficiency of the purchasing process. It ensures that all necessary information is available upfront, which speeds up the approval and procurement cycle.
Purchase requisitions help ensure compliance with internal policies and external regulations. By mandating approvals and providing a clear record of purchase requests, organizations can demonstrate that they follow proper procedures and adhere to regulatory requirements.
Determining whether your organization needs a purchase requisition process involves evaluating your current procurement practices and identifying areas of improvement. Uncontrolled spending, lack of visibility, frequent errors, tracking difficulties, inefficient workflows, compliance issues, and scaling challenges are all indicators that a formal purchase requisition process could significantly benefit your organization.
In conclusion, a purchase requisition plays a crucial role in streamlining the procurement process by ensuring that all purchases are necessary, approved, and aligned with budgets and policies. It serves as the first step in procurement, providing transparency, preventing unauthorized spending, and facilitating accurate record-keeping. When integrated with a smooth approval workflow, purchase requisitions help organizations maintain financial control and operational efficiency, laying the groundwork for effective purchasing decisions.