Understanding the processes and papers that assure efficiency and compliance is crucial to procurement and supply chain management. The buy request starts the procurement cycle and sets the stage for vendor management, contract renewals, and accounts payable automation. This article deconstructs purchase requisitions, explaining their importance, the procedures involved, and the benefits of procurement standardisation.
Purchase Requisition
A buy requisition is an important document used by a person or department to obtain items or services. It certifies the requirement for a purchase and ensures that the company’s purchasing policy is followed prior to making any financial obligations.
What You Learn
- The distinction between a purchase request and an order
- Purchase requisition components
- Purchase requisition process phases
- The strategic benefits of using buy requisitions to streamline procurement
Purchasing requisition vs. purchase order: Difference?
Purchase requisitions are internal documents used by employees to request products or services. It starts the procurement process and ensures it meets the company’s needs and budget. It is an internal contract that is non-binding.
A buyer sends a purchase order to a vendor to buy products or services. The seller’s acceptance of the purchase order creates a binding contract. These papers differ in procurement stage, purpose, recipients, and legal ramifications.
What does purchase requisitions contain?
A buy requisition is a strategic document that starts the procurement process. A well-structured purchase order includes:
Buying agent
The buy requisition procedure begins with identifying the requester. It seems apparent, but include the employee who discovered the demand for goods or services. Documenting the requestor’s information ensures accountability and communication throughout the procurement process.
Requestor department
Identifying the request department helps allocate expenses and ensures that the relevant department receives the items or services. Your finance staff would enjoy this information for tracking departmental expenditure and matching procurement with organisational budgets.
Sending/delivering address
To guarantee that requested products or services arrive on time, the delivery address must be precise. Accurate delivery information—office address, warehouse, or department—prevents logistical mistakes and hassles.
Date of request
Include the buy requisition’s creation date to follow the procurement process. It helps prioritise requests, manage lead times, and track procurement operations chronologically.
Requested delivery
Timing matters in procurement. Planning and receiving products or services on time by specifying the delivery date aids company operations.
Description of needed products or services
Perhaps the most crucial aspect of a purchase requisition is a clear description. This should contain model numbers, product names, specs, and any other information that may aid accomplish the purchase request. Clarity eliminates mistakes and helps the procurement department find the right items, services, and raw resources.
Quantity
Budgeting and supply planning depend on item quantities. Accurate quantity specifications prevent operational delays and over-ordering.
Price per unit and total
Despite being an estimate at requisition, the unit price is crucial to financial planning and budgeting. The total requisition price helps examine the purchase’s financial impact and ensure it meets budget.
Business justification
Strategic procurement involves business rationale for purchasing requisitions. It justifies the purchase, aligns it with corporate goals, and shows the predicted ROI.
Recommended vendor
Providing the legal name, mailing address, and contact information of a recommended vendor will speed up the buying process. When partnerships or agreements exist, this information can be used to negotiate better payment terms or price.
10-step purchase requisition workflow
The buy requisition procedure ensures that every corporate transaction is essential, justified, and in line with finance department standards and budget.
A broad workflow template helps comprehend and optimise this process, even if each organisation has its own workflow. However, deviations from a normal procedure might cause approval delays, financial problems, and operational inefficiencies.
1. Determine a need
An employee or team notices an organisational requirement, such as office supplies or equipment repair. This ‘need identification’ defines the purchase’s purpose and assures operational compliance.
2. Fill out a purchase order.
A buy requisition form details the request and summarises the business necessity. Modern procurement orchestration platforms like Zip allow stakeholders to submit this document electronically, ensuring transparency and control. Legacy systems may require manual submission.
3. Request review and approval
The department manager checks the requisition for completeness and budget alignment. Based on the organization’s requirements and finances, this may result in approval, a request for further information, or rejection.
4. Optional extra approvals
The demand may need permission from upper management, legal, IT, or other departments. If your organisation uses Zip, cross-functional approvals are straightforward, visible, and trackable, enabling real-time communication and notifications to keep everyone on track.
5. Stock check
Check sure the required products aren’t in stock before continuing. Avoiding needless purchases optimises resource use and reduces waste.
6. Purchase department final approval
For final approval, the buying department checks the demand against business purchase criteria. Requisitions might be returned or refused due to missing information, financial concerns, or business reason mismatch.
7. Purchase order created
The vendor receives a purchase order (PO) when the request is accepted. This document formalises the purchase agreement and becomes binding upon vendor acceptance.
8. Get goods/services
The seller provides products or services after agreement. This meets the urgent buying demand, pending order correctness and quality verification.
9. Three-way match
Three-way matching examines the purchase order, invoice, and delivery receipt before finalising the transaction. This inventory management check prevents mistakes and guarantees the order was performed as promised.
10. Invoice payment
Once all checks and approvals are complete, pay the vendor invoice. The organisation can finish the procurement procedure for that request by closing the buy requisition sequence.
Reasons for a purchase requisition
The purchase requisition may appear routine, but it protects against financial irregularities and improves corporate processes. A purchase requisition is needed because:
Purchase requisitions provide audit trails.
A purchase requisition starts a complete financial audit trail for purchases, ensuring accountability and transparency. This is the initial step in ensuring every purchase is required, permitted, and compliant with business regulations.
Purchase requisitions set clear rules.
buy requisitions standardise buy initiation, documentation, and approval procedures. This clarifies and simplifies procurement.
Requisitions optimise procurement.
Purchasing choices are intelligent and efficient when purchase requisitions are reviewed and approved. This streamlines procurement and allocates resources strategically.
A purchase reparation enhances responsibility through reviews.
The purchase requisition clearance procedure improves expenditure management and ensures budgetary and strategic compliance. This promotes financial discipline and value-based buying.
A Comparison between Procure-to-Pay versus Source-to-Pay
Purchase requisitions distinguish procure-to-pay (P2P) and source-to-pay (S2P) cycles. P2P focuses on requisition to payment, whereas S2P covers supplier sourcing to payment. Purchase requisitions are crucial to both strategic sourcing and operational procurement.
