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What is purchase requisition?

Throughout the course of business, you may need to purchase a wide range of equipment, from office supplies and training resources to marketing materials and software subscriptions. How does that process work? To understand that, you need to understand the idea behind purchase requisition. Find out everything you need to know about the process, from the benefits of purchase requisition forms to purchase requisition vs. purchase order. First off, here’s our purchase requisition definition.

Purchase requisition definition

Purchase requisitions – also referred to as purchase requisition forms – are documents that are used when employees need to make a purchase or order request. Anytime an employee wants to make a purchase – say, for example, they need a new laptop – they’ll use a purchase requisition form to explain exactly what the purchase is and why they need it for work. It’s used to ensure that all business purchases are legitimate and that there’s a genuine need for the item that’s being requested.

Purchase requisition vs. purchase order

When it comes to procurement, one of the key areas of confusion is the difference between purchase requisitions and purchase orders. Fortunately, purchase requisition vs. purchase order is a simple issue to clear up. Purchase requisitions are internal documents sent by employees to initiate a purchase. Once the purchase has been approved by the necessary person or department, a purchase order is sent to a supplier to order the goods/services in question. Put simply, purchase orders are legally binding documents that are only issued once the request has been approved.

Purchase requisition example

Now that you know a little more about purchase requisitions, let’s explore how the process works in a little more detail. In our purchase requisition example, we’ll imagine that the finance department wants to splash out on a new piece of financial software:

  1. First, the employee will need to get a purchase requisition form. This is likely to be from the procurement team, although for businesses using e-procurement, you may need to log onto the system to make a request.

  2. Then, the form needs to be filled out. Some of the key details include a description of the item, the quantity of items needed, and reason for purchase. For example, if you’re in need of new financial software, you’ll need to explain which software package you want and why it’s important for this purchase to be made.

  3. After this, the form will be sent out for approval. If the approver doesn’t sanction the purchase, you’ll usually receive a short explanation explaining why this is the case. Sometimes, the purchase requisition form will need to be sent to somebody else in the company to confirm specific details about the purchase. For example, is the software package you’ve selected compatible with the other programs used by the company? Does it meet the data security standards of the IT department? If satisfactory, the purchase requisition will be forwarded to the procurement team.

  4. Finally, your purchase will be sourced, and a purchase order will be drawn up. This is then sent to a supplier, completing the purchase requisition process.

Why is purchase requisition important?

There are several reasons why it makes sense to implement a purchase requisition process at your business. First and foremost, purchase requisition forms can help protect your business against the risk of fraud. Without any proper checks, there’s always a possibility that employees will misuse company funds and purchase items for their own personal use. Implementing purchase requisition ensures full transparency across all purchases.

Furthermore, purchase requisition centralises the whole procurement process within one department. That’s beneficial not only because it reduces delays in the procurement process, but because it means that your business may be better able to leverage its buying power to negotiate more favourable terms for purchases. In short, it’s likely to save your business money. 

It’s important to note that for some businesses, purchase requisition may be more of a hassle than it’s worth. For example, if you have a small business with fewer than 10 employees, it may not make sense to invest time and effort in a fully mapped-out purchase requisition process. Having said that, you can never be too prepared, and even if purchase requisition doesn’t make sense for your business right now, it may in the future.

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