Finance and procurement teams understand the need of efficient procurement. A solid system for ordering raw materials, supplies, and services enables timely and cost-effective procurement. That method relies on the purchase requisition and purchase order. In this essay, we’ll compare these two papers and show how stakeholders’ acceptance improves purchasing workflow automation.
Purchase Requisition
Internal purchase requisitions are sent to finance or buying by employees or departments to seek products or services. The purchase request includes the item or service, quantity, projected cost, and other parameters. Usually the department head or budget holder approves the purchase requisition to verify it is essential and within budget.
What does a purchase requisition includes?
Essentially, a purchase request summarises what an employee wants to acquire so a finance or procurement approver may determine whether to continue. An employee must give the following to aid that decision:
- Purchase item or service requisition number
- Quantity required
- Date of delivery
- Budget code
- Product or service specs
- Purchase justification or documentation
- Requisition submitter contact details
- Company rules may require approval from one or more employees.
An first purchase requisition may appear easy. However, the accounting department relies on it as a first step in the purchase process to establish an audit trail for invoice approval.
Purchasing Order
Purchasing sends a valid buy order to a supplier to order goods or services. A purchase order includes the goods or service, quantity, agreed-upon price, delivery date, and payment conditions. After receiving and acknowledging the purchase order, the provider must fulfil it as agreed.
Purchase orders are generated by the buying department when a request is authorised. The buying department will produce a purchase order based on the item or service’s quantity, price, delivery date, and payment conditions. A unique identification number, supplier name and address, products or services to be bought, quantity, price, and other data will be on the purchase order. The provider will be legally compelled to perform the purchase order once it is finalised.
What information does purchasing orders contains?
Purchasing orders define a company-supplier purchasing arrangement. Some of this information is from the buy request, while others must be obtained from the provider before establishing the procurement system purchase order.
A typical purchase order must include:
- Purchase order #
- Item or service ordered
- Quantity ordered
- Unit price or total order cost
- The delivery date and place
- Payment terms and methods
- Logistics: Shipping address and handling instructions
- Any fees or taxes
- Company and supplier contact information
This information in a purchase order helps the firm and supplier stay on the same page and fulfil the order. Most contemporary organisations use e-procurement, procure-to-pay, or ERP systems to track this process.
Purchase Requisition vs. Purchase Order: Key Differences
A buy requisition is an internal document used to begin a purchasing request, whereas a purchase order is an external document used to formalise and authorise a purchase. Both documents are crucial for procurement, but they have distinct functions, formalities, and legal significance.
| Purchase Requisition | Purchase Order | |
| Intended Recipient: | Internal to the company | External to the company (supplier) |
| Purpose | Requests goods or services | Official order for goods or services |
| Initiation | Initiated by an employee | Initiated by the purchasing department |
| Approval | Requires approval before creating a purchase order | Typically does not require approval |
| Information include | Item or service, quantity, delivery date, budget code, specifications, supporting documentation, contact information | Items or services, quantity, cost per unit or overall, terms and conditions of payment, delivery date and location, shipment or handling instructions, taxes or fees, and contact details |
| Legal document | Not a legally binding document | Legally binding document |
| Used in workflow | First step in the purchasing process | Final step in the purchasing process |
Common difficulties with purchasing requisitions vs. orders
However, buy requisitions and orders are related in your purchasing process. Unfortunately, this link typically has baggage. In example, the buy requisition procedure can slow a company’s procurement process.
Lack of detail in the buy request might cause confusion or delays in the purchasing process. The individual submitting the purchase requisition may not offer adequate information regarding the goods or service, such as the number or specs.
Purchase requisitions are often produced, evaluated, and approved inconsistently due to a lack of standardisation. This might delay or obstruct purchases and make budgeting and tracking harder.
Inadequate training or resources for procurement workers, unclear policies and processes, and a failure to use procurement software or technologies to automate and expedite the buy request process can create these issues.
Businesses are quickly using intake-to-procure technologies to close this gap. These applications collect purchase request information using dynamic request workflows with category- and process-specific inquiries to direct users to the right areas. Users get a more complete, straightforward purchase request experience, while finance and procurement gather more information upfront to speed up PO preparation.
How purchase requisitions and orders simplify purchasing
Purchase orders and requisitions work together to streamline and eliminate errors in the purchasing process.
By providing thorough and standardised information in the buy request, the purchasing department can swiftly and properly construct a purchase order, avoiding mistakes and approval delays.
Better upfront data gathering automates the buy request and purchase order procedures, saving organisations time and reducing mistakes. A more efficient and successful procurement process may benefit the entire organisation.
A lack of information and flexibility in how a finance or procurement department processes request intake might hinder the smooth link between buy requisition submission and purchase order production.
Historically, procure-to-pay purchase requisition formats were strict and goods-centric. This implies e-forms work well for simple catalogue goods but often fail for more prevalent purchase types, such SaaS software, which are harder to capture in a P2P catalogue.
Why Finance and Procurement Leaders Care About PRs vs. POs
Chief Financial Officers and Chief Procurement Officers must distinguish buy requisitions from purchase orders for numerous reasons. Managing document processes properly:
- Standardises the buying department’s workflow to reduce mistakes, delays, and wasteful purchases.
- Allows improved cost control by ensuring purchases are made only when needed and within budget to meet corporate demands.
- Makes purchase order terms and conditions transparent and legally enforceable to avoid supplier conflicts.
- Create a paper trail for accounts payable staff to verify orders were delivered on time, in quantity, and at the expected price before paying an invoice.
Purchase Requisition and Order Best Practices
CFOs and Chief Procurement Officers should develop clear standards for drafting, evaluating, authorising, and monitoring buy requisitions and orders to streamline procurement. As mentioned above, each document type has its own purpose and criteria, therefore developing each demands specialised techniques.
Purchase requisition best practices include:
- Provide details: Purchase requisitions should include quantity, specifications, delivery date, and budget code.
- Process standardisation: Create a purchase request template with clear instructions for completion, evaluation, and approval.
- Use procurement software: Automate the buy requisition process using intake-to-procure software to reduce mistakes and delays.
- Employee training: Give buy requisition personnel instruction on how to fill out the form correctly and follow purchasing regulations.
- Watch the process: Review the purchase requisition process often to enhance and streamline it.
Purchase order best practices include:
- Ensure accuracy: For correctness, double-check the purchase order’s item or service, quantity, price, delivery date, and payment conditions.
- Continue communication: Contact the supplier throughout the purchasing process to confirm receipt, track status, and resolve any concerns.
- Process centralization: Keep all purchase orders in one place, organised, accessible, and safe.
- Track delivery and payment: Track delivery and make sure payment meets purchase order requirements.
- Review regularly: Review the buying process, including purchase order development and management, regularly to find opportunities for improvement and ensure it is efficient, effective, and compliance with business regulations.
The secret to PR/PO automation? A smooth intake-to-purchase
Finance teams and procurement managers must distinguish between purchase requisitions and purchase orders. Following best practices and using contemporary procurement systems helps streamline and expedite your procurement process for timely and cost-effective acquisitions.
