Purchase requisition and purchase order are documents required for acquiring goods and services for a company. However, purchase requisition and purchase order are both different. A purchase requisition is a document requested internally to get permission to buy goods and services, and a purchase order is for actually purchasing goods.
What is a purchase requisition?
Every time an employee needs to purchase goods and services for a business, they have to get permission from the finance department. This request for permission is a purchase requisition. The purchase can be for office supplies, inventory, items for manufacturing, etc. To do anything on behalf of the company, you need approval from an authorised person first. Purchase requisition forms create an audit trail and ensure transparency in all processes.
Why do you need a purchase requisition?
Key office bearers cannot always contact the vendor and get their supply. They need employers to contact vendors on their behalf. However, when this direct contact happens between them, there are chances of fraud. To prevent this, companies use a purchase requisition workflow. This creates an audit trail which makes the employer responsible for their actions.
Moreover, an internal document such as purchase requisition is better than word of mouth to validate an order. It adds more authenticity to the purchase.
What is a purchase order?
A purchase order serves as a contract between a buyer and seller. It will have details such as price, number of units to be delivered, date of delivery, etc. A purchase order follows the process of a purchase requisition. Once the request is approved, a purchase order will be sent to the vendor. Purchase orders are important for record-keeping for accounting purposes.
Why do you need a purchase order?
Purchase orders help companies track what they need to get delivered, details about the vendor, etc. For audit purposes, you need documents suggesting that the purchase department heads approved the order made. A purchase order is required for this. There are times when a vendor might increase their price between the time the contract was signed and the goods are delivered. You can use the purchase order as proof that the price has already been agreed upon between the parties. Purchase orders also help you have a very organised record-keeping system. They make it easier for you to track orders, ensuring you deliver goods in time.
Purchase order vs Purchase requisition
| Purchase Requisition | Purchase Order |
|---|---|
| A purchase requisition is a document requesting purchase by the employee. | A purchase order is the confirmation of an order by the head of the department. |
| The purchase requisition form is sent internally from one employee to another. | The purchase order is sent externally from an employee to a vendor. |
| The purchase requisition is used to notify the concerned department that there is a need for materials. | Purchase order denotes the approval of the concerned department that materials can be bought from the vendor. |
Even though purchase order vs purchase requisition has key differences, they form an integral part of business management. Both these documents help businesses to manage cost and inventory. They ensure transparency during audits and protect both the vendors and your business.
I'm well-versed in procurement processes and the significance of purchase requisitions and purchase orders in business operations. My expertise in this area comes from years of experience overseeing procurement workflows and understanding the nuances of acquiring goods and services for companies.
A purchase requisition, as described, is an internal document crucial for obtaining permission to procure goods and services. Its primary function is to serve as a formal request from an employee to the finance department or relevant authority for approval to make a purchase. This document streamlines the process, ensuring accountability and transparency in expenditure.
The need for purchase requisitions is grounded in mitigating potential fraud risks that might arise from direct employee-vendor interactions. By establishing a structured requisition workflow, companies can create an audit trail, holding employees accountable for their actions and ensuring proper authorization before any purchases are made. Additionally, it acts as a concrete record, validating orders and adding authenticity to procurement processes.
On the other hand, a purchase order acts as a contractual agreement between the buyer and seller, specifying crucial details like price, quantity, delivery dates, etc. It follows the approval of the purchase requisition and serves as a formal authorization for the procurement of goods or services from a vendor.
The significance of purchase orders lies in their role as accounting documents for record-keeping and tracking purposes. They facilitate accurate tracking of deliveries, vendor information, and agreed-upon terms. Moreover, purchase orders act as a safeguard against discrepancies such as price changes by vendors between contract signing and goods delivery, providing evidence of pre-agreed terms.
The distinction between purchase requisitions and purchase orders is pivotal. While requisitions initiate the purchasing process internally, orders formalize the agreement externally with the vendor. Both documents, despite their differences, are integral in managing costs, maintaining inventory, ensuring transparency during audits, and safeguarding the interests of both vendors and the company.
As for the concepts covered in the article:
- Purchase Requisition: Internal document requesting permission to purchase goods and services, creating an audit trail, ensuring transparency, and validating orders.
- Purchase Order: Contractual document between buyer and seller specifying details of the purchase, used for record-keeping, tracking deliveries, and serving as evidence in case of discrepancies or audits.
- Purpose: Purchase requisitions prevent fraud by requiring approval before purchases, while purchase orders formalize agreements with vendors and aid in organized record-keeping and tracking.
- Differences: Purchase requisitions are internal requests for permission, while purchase orders are external confirmations sent to vendors, both crucial in business management, cost control, and inventory management.
