What Is a Purchase Requisition and How Does It Work?

A purchase requisition is an internal document that initiates the procurement process for goods or services within an organization. It acts as a formal request from a department or employee to the purchasing department, signaling a need for specific items. This internal request helps manage and control spending before external commitments are made.

Understanding a Purchase Requisition

A purchase requisition is a formal internal request for the acquisition of goods or services. Its purpose within an organization’s procurement cycle is to authorize and track internal spending. Organizations utilize these documents to establish a clear audit trail for expenditures, ensuring purchases align with budgetary constraints and company policies.

This internal document provides a structured way to communicate needs, allowing management to review and approve requests before proceeding to external suppliers. Using a requisition system helps prevent unauthorized purchases and supports financial oversight. It also facilitates better inventory management and budget allocation across various departments.

Key Information Included

A purchase requisition form typically requires several pieces of information for proper processing. It includes the name or department of the individual making the request, along with the date of submission.

Detailed descriptions of the goods or services needed are also provided, including specifications, quantities, and an estimated cost for each item. If a specific vendor is preferred, their information may be included. The form also asks for a clear justification for the purchase, explaining why the item or service is necessary for operations.

Information regarding the desired delivery date and location is included. A crucial element is the account or budget code to be charged, which links the purchase to a specific financial allocation and aids in accurate cost tracking.

The Internal Approval Process

Once a purchase requisition is completed, it enters an internal approval workflow. The initial step involves submission to a direct manager or department head, who reviews the request for its necessity and alignment with departmental goals. This ensures that the proposed purchase supports the operational needs of the requesting unit.

Following departmental review, the requisition typically moves to finance or budgeting departments. These teams verify the availability of funds within the designated budget code and ensure the proposed expenditure adheres to the organization’s financial policies. This step is crucial for maintaining fiscal responsibility and preventing overspending.

Further approvals may be required depending on the monetary value or nature of the purchase. For instance, requests exceeding a certain financial threshold may necessitate authorization from a higher-level manager or even a dedicated purchasing committee. The purchasing department then reviews the request for compliance with procurement policies and vendor management guidelines. The outcome of this multi-tiered approval process determines whether the request is approved, rejected, or sent back for additional information.

Distinguishing from a Purchase Order

Understanding the difference between a purchase requisition and a purchase order is important, as they serve distinct roles in the procurement cycle. A purchase requisition is an internal document, used within the organization, to express a need and request authorization for a purchase. Its primary audience is internal staff, such as departmental managers, finance personnel, and the purchasing department.

In contrast, a purchase order is an external document that represents a legal commitment to a supplier. It is issued by the purchasing department to a vendor, authorizing the purchase of specific goods or services at agreed-upon terms. The purchase order serves as an official contract with an external party, specifying quantities, prices, delivery terms, and payment conditions.

The purchase requisition precedes the purchase order in the workflow. An approved requisition grants the internal authorization to proceed with a purchase, which then enables the creation and issuance of a purchase order to an external vendor. The requisition is a request for approval to buy, while the purchase order is the actual instruction to buy, sent outside the company.