What Is Purchase Requisition:
Step-by-Step with Best Practices

What Is Purchase Requisition?

A purchase requisition (PR) is a formal document used within a company to initiate the process of acquiring goods or services from an external supplier. It serves as an internal request submitted by an employee (often someone who needs the supplies or services) to the procurement department. Think of it as a way to get permission and authorization to make a purchase.

Here’s a breakdown of the key aspects of a purchase requisition.

What Is the Purpose of Purchase Requisition?

Purchase requisition clearly communicates a need for specific goods or services. This document provides justification for the purchase and initiates the formal purchasing process.

What Information is Typically Included in Purchase Requisition?

• Requesting department and employee
• Detailed description of the required goods or services
• Quantity needed
• Estimated cost
• Preferred supplier (if known)
• Delivery timeframe

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What is the Approval Workflow for Purchase Requisition?

The purchase requisition is submitted to the appropriate department head or manager for approval. Depending on the cost or complexity of the purchase, it might require further approval from higher management or the procurement department.

Once all necessary approvals are obtained, the procurement department can proceed with the next steps, such as soliciting quotes from vendors and issuing a purchase order.

Benefits of Purchase Requisitions

• Improved Control: PRs ensure proper authorization for purchases, preventing unauthorized spending and maintaining budget control.
• Transparency: Clear documentation of needs and justifications fosters transparency within the organization.
• Efficiency: Streamlined PR processes expedite the purchasing process and minimize delays.
• Reduced Errors: Formalized requests minimize errors and ensure the procurement of the correct items.

By implementing a well-defined purchase requisition process, companies can achieve greater control over their spending, improve operational efficiency, and ensure they acquire the necessary resources to function smoothly.

What Problems Can be Solved with Effective Purchase Requisition?

Purchase requisition processes address various challenges in procurement and supply chain management, including:

Streamlining Procurement

Purchase requisitions help standardize and automate the procurement process, ensuring that all necessary approvals and documentation are in place before purchases are made.

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Cost Control

By centralizing purchase requests, organizations can better track and manage spending, prevent unauthorized purchases, and negotiate better deals with suppliers.

Compliance and Governance

Purchase requisitions enforce compliance with organizational policies, industry regulations, and budgetary constraints, reducing the risk of fraud, errors, and non-compliance.

Inventory Management

By having a clear overview of requested purchases, organizations can optimize inventory levels, minimize stockouts, and reduce carrying costs.

Vendor Management

Purchase requisitions enable organizations to evaluate supplier performance, negotiate favorable terms, and maintain relationships with preferred vendors, ensuring timely delivery and quality goods/services.

Purchase Requisition Process Step by Step

Here is a step-by-step guide for creating and managing purchase requisitions:

Step 1. Identify Need

Determine the need for a purchase requisition based on inventory levels, upcoming projects, or requests from departmental stakeholders.

Step 2. Gather Information

Collect all necessary details for the requisition, including item descriptions, quantities, preferred vendors, delivery deadlines, and budget codes.

Step 3. Complete Requisition Form

Fill out the purchase requisition form provided by your organization’s procurement department or use an electronic requisition system if available. Include all required information and attach any supporting documents, such as quotes or specifications.

Step 4. Purchase Requisition Review and Approval

Submit the requisition for review and approval according to the established approval workflow. The requisition may need to be reviewed by department heads, budget managers, and procurement personnel before final approval.

Step 5. Vendor Selection

Once the requisition is approved, procurement staff will select appropriate vendors based on pricing, quality, availability, and other factors. They may negotiate terms and issue purchase orders to selected vendors.

Step 6. Order Processing

Vendors receive the purchase orders and begin processing the orders. Procurement personnel monitor the order status and coordinate delivery schedules to ensure timely receipt of goods or services.

Step 7. Receipt and Inspection

Upon delivery, the receiving department verifies the contents of the shipment against the purchase order and packing slip. Any discrepancies or damages are documented and reported to the procurement team for resolution.

Step 8. Invoice Matching

Finance or accounts payable staff match the vendor invoices with the corresponding purchase orders and receiving documents. They ensure accuracy in pricing, quantities, and terms before processing payment.

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Step 9. Payment Authorization

Approved invoices are processed for payment according to the organization’s payment schedule and payment terms negotiated with vendors. Payments are made via electronic funds transfer or by issuing checks.

Step 10. Record Keeping

Maintain detailed records of all purchase requisitions, purchase orders, invoices, and receipts for audit and compliance purposes. Use an electronic document management system or filing system to organize and store procurement documents securely.

By following these steps, organizations can effectively manage their purchase requisition process, streamline procurement operations, and ensure compliance with internal policies and regulatory requirements.

Best Practices for Using Purchase Requisitions

Implementing best practices for using purchase requisitions can optimize procurement processes and ensure efficient resource allocation. Here are some key recommendations:

1. Standardize Processes: Develop clear and standardized procedures for submitting, reviewing, and approving purchase requisitions. This ensures consistency and transparency across the organization.
2. Define Approval Workflows: Establish predefined approval workflows based on factors such as the purchase amount, department, and type of item. Clearly define the roles and responsibilities of approvers to expedite the approval process.
3. Use Modern ERP Technology: Leverage procurement software or enterprise resource planning (ERP) systems to automate purchase requisition workflows. These tools can streamline request submission, route approvals, and provide real-time visibility into the procurement pipeline.
4. Communicate Purchasing Policies: Educate employees about the organization’s purchasing policies and guidelines for submitting purchase requisitions. Encourage adherence to budgetary constraints, preferred suppliers, and compliance requirements.
5. Monitor Performance: Regularly review key performance indicators (KPIs) such as requisition cycle time, approval delays, and vendor performance. Identify bottlenecks and areas for improvement to enhance process efficiency.
6. Foster Inter-Department Collaboration: Encourage collaboration between procurement, finance, and departmental stakeholders to align purchasing decisions with organizational goals. Solicit feedback from end-users to better understand their needs and preferences.
7. Ensure Procurement Compliance: Maintain compliance with regulatory requirements, industry standards, and internal policies throughout the procurement lifecycle. Conduct periodic audits to identify non-compliance issues and implement corrective actions.

By following these best practices, organizations can streamline their procurement processes, mitigate risks, and achieve cost savings through effective purchase requisition management.

Purchase Requisition in Detail: Key Terms Explained

What Is the Definition of Purchase Requisition?

A purchase requisition serves as the formal documentation of a business need for specific goods or services. It includes essential details such as item descriptions, quantities, delivery requirements, and any other pertinent information necessary for procurement.

Who is a Requisitioner?

The individual or department responsible for initiating the purchase requisition. Requisitioners are typically the end users or stakeholders who identify the need for goods or services and provide the necessary specifications to procurement teams.

Who is the Approver in Purchase Requisitions?

Approvers are individuals or stakeholders who hold the authority to review and authorize purchase requisitions. They ensure that requisitions comply with organizational policies, budgetary constraints, and other relevant criteria before they are submitted for procurement processing.

What Is Procurement?

Procurement encompasses the entire process of sourcing, purchasing, and managing goods and services to meet the needs of an organization. It involves activities such as supplier selection, contract negotiation, purchasing, and supplier relationship management.

What Is a Purchase Order?

A purchase order is a legally binding document issued by the buyer to the supplier, formally requesting the delivery of goods or services at specified terms and conditions. It includes details such as item descriptions, quantities, prices, delivery dates, and payment terms.

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Who is a Vendor?

Vendors are external suppliers or service providers from whom organizations procure goods or services. They play a crucial role in fulfilling the requirements outlined in purchase requisitions and purchase orders, providing quality products or services in a timely manner.

What Is a Budget Code?

A budget code is a unique identifier or code assigned to a purchase requisition, indicating the specific budget allocation or funding source to be utilized for the procurement. It helps organizations track expenses and ensure that purchases align with budgetary constraints and financial goals.

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How Does Approval Workflow Work?

An approval workflow refers to the predefined sequence of steps and individuals involved in reviewing, approving, and processing purchase requisitions within an organization. It ensures that requisitions are properly vetted, authorized, and executed according to established policies and procedures.

What is a Delivery Schedule?

The delivery schedule outlines the agreed-upon timeline or schedule for the delivery of goods or services as specified in the purchase requisition and purchase order. It includes important details such as delivery dates, locations, and any special instructions for the supplier.

How Important Is Compliance?

Compliance refers to the adherence to internal policies, procedures, and regulatory requirements governing the procurement process. It encompasses ethical standards, legal obligations, financial regulations, and any other relevant guidelines that organizations must follow to ensure transparency, integrity, and accountability in various procurement activities.

Final Thoughts: Empowering Procurement with Streamlined PRs

By understanding the significance of purchase requisitions and implementing the best practices outlined in this blog, you can empower your procurement team to function at its peak efficiency. Clear and accurate PRs ensure transparency, minimize errors, and pave the way for informed purchasing decisions.

Remember, a well-defined PR process streamlines communication between departments, reduces approval times, and ultimately, keeps your business on track for success. So, don’t underestimate the power of this unsung hero! Start incorporating these best practices today and experience the positive impact a robust purchase requisition system can bring to your procurement operations.