When you’re ready to make purchases for your business, you’ll need to decide whether to create a purchase requisition or a purchase order. What is the difference between requisition and purchase order processes? How do you know when to use either one or both? Knowing the answers to these questions can help you make the right decision for your business.
What Is a Purchase Requisition?
A purchase requisition is an internal request to buy goods or services. Someone in your organization typically creates a requisition order. This person may need the goods or services, such as an employee or department head.
The requisition process typically starts with the creation of a requisition form. This form includes information about the goods or services needed and the quantity, delivery date, and other vital details. It also consists of a requisition number.
Once completed, the creator forwards it to the appropriate people in the organization for approval. After approval, it goes to the purchasing department. Also known as procurement, this team sources the goods or services and negotiates with suppliers.
What Is a Purchase Order Request?
A purchase order is a formal document that procurement or the AP team sends to a supplier confirming your intent to purchase goods or services at a set price. It typically includes the following information:
- Purchase order number
- Supplier name and address
- Shipping details
- Billing details
- Description of the goods or services purchased
- Quantity of goods or services purchased
- Pricing information
- Terms and conditions
The supplier will then review the purchase order. If everything is in order, the supplier provides you with a confirmation of the order and follows up with delivery. Once you’ve received the goods or services, you’ll need to send a purchase order confirmation to the supplier. This document includes information about the goods or services received, as well as the quantity, quality, and delivery date.
What Is the Difference Between the Purchase Order and Purchase Requisition?
The main difference between a purchase requisition and a purchase order is that a requisition is an internal request. In contrast, a purchase order is a formal document sent to a supplier. Here are two other differences:
- A requisition form includes information about the goods or services needed and the quantity, delivery date, and other essential details. The purchase order consists of this information, pricing information, and terms and conditions.
- Once approved, the requisition goes to the purchasing department, which is responsible for sourcing the goods or services and negotiating with suppliers. The purchase order goes directly to the supplier.
When Should You Use a Purchase Order vs Purchase Requisition?
Now that you know the difference between a purchase requisition and a purchase order, you may be wondering when you should use each one. Generally speaking, you should use a purchase requisition to make an internal purchase, such as office supplies or software licenses. You should use a purchase order when buying goods or services from an external supplier.
Of course, there are always exceptions to this rule. For example, you may need to create a purchase requisition if you’re buying goods or services from an external supplier but don’t have a contract. Also, some people would argue that a purchase requisition is a formal pre-requisite for a purchase order, so some transactions require both.
If you’re not sure whether you should use a purchase requisition or a purchase order, your best bet is to check with your organization’s purchasing department. They can guide you on which process to use for your specific situation.
How Can Automation Improve Purchase Orders and Purchase Requisitions?
You’re not alone if you’re still using paper-based processes for purchase requisitions and purchase orders. Many organizations have yet to automate these critical procurement processes. Factor these benefits of automating purchase requisitions and purchase orders into your decision-making process:
- Faster approvals: With an automated system, you can route requisitions and purchase orders through the approval process faster. This means you can get the goods or services you need promptly.
- Reduced errors: Automated systems reduce errors and improve efficiency by ensuring that all the information is accurate and complete before the requisition or purchase order goes to the supplier.
- Improved visibility: An automated system provides visibility into the status of requisitions and purchase orders, so you always know where things are in the process.
- Better agility: An automated system gives you the agility you need to respond quickly to changes, such as a sudden increase in demand or a supplier issue.
How Can You Automate the Requisition and Purchase Order Processes?
If you’re ready to automate your requisition and purchase order processes, you need a procure-to-pay solution that can handle both processes. Shopping around for the right software will take research and maybe some trial and error. Prioritize solutions that make the following tasks possible:
- Create and approve requisitions and purchase orders electronically.
- Manage contracts and suppliers in one place.
- Access real-time reports and analytics.
Most organizations use both purchase orders and requisition orders. Automating both forms and processes introduce efficiencies and eliminate risks associated with manual entry.
