Purchase requisitions (PRs) and purchase orders (POs) are two important tools for managing your business’ procurement process.
Let’s define these tools and their functions in more detail. Then, we’ll look at how streamlining your purchase requisition to purchase order process can increase your business’ efficiency and cost-effectiveness.
Diving into Purchase Requisitions (PRs)
A purchase requisition is an internal form that staff members use to communicate needs for goods or services.
Typical elements of a purchase requisition form include:
• Requisition number
• Date of request
• Name of requester
• List of goods or services requested with a description, anticipated price, and quantity
• Accounting codes
• Vendor information and copies of quotes
• Date goods or services are needed
After a purchase requisition has been created, the requester usually submits it for approval. The people who must approve the purchase requisition may vary, depending on the nature and amount of the goods or services requested.
Once a purchase requisition has been approved, it often goes to the purchasing or finance department, who are responsible for creating purchase orders. Some purchase requisitions can be split over multiple purchase orders, or later bundled with other purchase requisitions on a single purchase order if they have a common vendor.
Software solutions like Spendwise can help you create and manage your purchase requisitions easily and eliminate the headaches that come with using paper, spreadsheets and email. They also enable greater visibility so you can see what goods or services have already been requested. As well, they make it easier to bundle similar requests into the same order, which can lead to volume discounts and lower shipping costs.
Unpacking Purchase Orders (POs)
A purchase order is an external document sent to a vendor to communicate a need for goods or services and to share terms of the purchase. It establishes a legally binding agreement with that vendor. It is created after a purchase requisition and is also informed by conversations and negotiations with the selected supplier.
The purchase order has a lot of crossover with a purchase requisition, containing many of the same details. However, the PO contains firm and final details like selected vendor, exact price, and terms.
A typical purchase order contains information like:
• PO number
• Creation date
• Item description, price, and quantity
• Company shipping and billing addresses, emails, and phone numbers
• Delivery instructions
• Payment information
• Date when delivery of goods or services is due
• Terms and conditions
The purchase order is a critical document in formalizing agreements with vendors and ensuring clarity in purchases. Vendors use the purchase order to fulfill your order and it serves as an official record of what was promised. When goods or services are delivered, you can compare them against what is on the purchase order to ensure alignment. You can also validate vendor invoices against what is on the corresponding purchase order. Later, your PO records will be critical for accountability, compliance, and smooth audits.
The Flow: From Purchase Requisition to Purchase Order
From initial request to purchase order, the general flow of this process is as follows:
Initiation: A team member who needs goods or services initiates a purchase requisition and submits it for approval.
Approval: The purchase requisition goes through an approval process. This may factor in certain spending thresholds, specific required approvals (e.g. information technology services), and other conditions.
Purchase Order Creation: After the purchase requisition is approved, its information can be used to create a purchase order.
Because purchase requisitions and purchase orders share a lot of information, using a tool like Spendwise to quickly convert your purchase requisition into a purchase order can save you significant time, simplify the task, and ensure no details are lost in the transition. You’ll also be able to easily track all of your purchase orders in one organized place.
Why the Distinction Between Purchase Requisition and Purchase Order Matters
Purchase requisitions and purchase orders serve separate functions for your business.
The purchase requisition is valuable for multiple stakeholders to communicate with each other. It also serves as a filter before you start the purchase to make sure that the good or service makes sense for your budget and needs.
The purchase order includes all final information about a purchase. It is used as a record of truth about your purchase, containing details like cost and quantity and agreed-to terms both before and after delivery.
Confusing the two documents could lead to supplier misunderstandings or delays, for example, if they receive a purchase requisition when they expect a purchase order with the necessary terms or approved details. Skipping a purchase requisition and going straight to a purchase order might result in unauthorized purchases and surprises.
Leveraging Technology for Efficiency
You likely already have a requisition process, whether formalized or not. Defining a standard process for your purchases and adding a digital solution can make the purchase requisition to purchase order process easier for everyone.
Here are a few of the benefits of automating your purchase requisition to purchase order process:
Easy requisition creation: With Spendwise’s pre-populated data, you can easily select common options from dropdown menus, like items, vendors, and accounting codes. You can also simply copy an existing purchase requisition with a new number for repeat purchases.
Efficient approval routing: Using automated routing and alerts, your requesters don’t have to chase down signatures for their purchase requisition, speeding up time to approval.
Less manual entry and fewer errors: With automatic conversion of a purchase requisition to a purchase order, you won’t have to enter the same data twice. This lowers your chances of discrepancies and mistakes when transitioning to the PO.
Budget visibility: A modern tool gives you an organized view of your spending across your documents, all in one place. As well, Spendwise tracks your purchasing and projected purchasing in real time so you can make better decisions.
How Spendwise Can Help
To level up on your purchase requisitions and purchase orders, a tool like Spendwise could be a game-changer. Get in touch with us for a demo here to see how.