Purchase Requisition

What is a Purchase Requisition?

A Purchase Requisition (PR) is an instruction or authority given to allow an employee or department within a company to raise a purchase order to buy goods or services. It’s an internal document that seeks approval before making any purchase. Once approved, it signals that the procurement process can move forward.

Components of a Purchase Requisition

A purchase requisition form is a vital tool for managing spending in a business. It provides an audit trail and helps track expenses, control budgets, and prevent unauthorised purchases. The main components of a purchase requisition Include:

Requestor Information

This includes the name and department of the person requesting the purchase. It helps identify who is making the request and their role within the organisation.

Requestor Information

This includes the name and department of the person requesting the purchase. It helps identify who is making the request and their role within the organisation.

Description of Goods/Services

This clearly states what is needed. It is crucial to be as specific as possible to avoid confusion later on.

Quantity

This specifies how much of the item or service is required. Accurate quantities help prevent overordering or underordering.

Budget Code

This indicates where the funds will come from. Linking the requisition to a budget code ensures that spending aligns with the organisation’s financial plans.

Approval Signatures

This section includes the names and signatures of those who must approve the request. Approval usually comes from a manager or department head who has the authority to authorise the expenditure.

Benefits of a Purchase Requisition

Effective financial management is crucial for success. Organisations can streamline their procurement processes with greater transparency and control by using a purchase requisition. Below are some of the primary benefits that highlight the importance of implementing a Purchase Requisition system.

Controls Spending

The requirement for approval before making purchases allows for better monitoring of company expenses. This process helps prevent overspending and ensures that funds are used wisely.

Prevents Unauthorised Purchases

By requiring approval, the system ensures that only authorised purchases are made. This reduces the risk of employees purchasing items that are not necessary or outside of their departmental budget.

Creates Accountability

A Purchase Requisition clearly records who requested what, when, and why. This transparency helps hold employees accountable for their spending decisions and can be valuable during audits.

Improves Budgeting

The requisition process allows management to plan more accurately. Companies can better manage their budgets and forecast expenses by tracking upcoming purchases and associated costs.

What’s the difference between a Purchase Requisition and a Purchase Order?

A Purchase Requisition (PR) and a Purchase Order (PO) are both essential documents in the procurement process, they service different purposes. Once the internal purchase requisition is approved, a purchase order (PO) will be created. The PO is a commercial document issued by a buyer to a seller confirming the goods or services required together with the quantity and specification needed (CIPS, 2024). The PO serves as a binding agreement between the buyer and the supplier, ensuring clarity on what is being purchased.

The key difference between the two lies in their purpose and stage in the procurement process. The purchase requisition seeks internal permission to spend, while the purchase order is the formal external communication to the supplier that confirms the purchase.