What Is a Purchase Requisition in Procurement?

A purchase requisition is a foundational document in an organization’s procurement cycle. It serves as an internal request that initiates the process of acquiring goods or services. This formal document helps ensure all purchases are authorized and aligned with the company’s operational needs and budgetary constraints. It provides a structured way for employees to communicate their needs to the purchasing department before any external commitment is made, setting the stage for controlled and transparent spending.

Understanding the Purchase Requisition

Its primary purpose is to formalize and document a need for expenditure within the organization. This preliminary step is crucial for maintaining financial control and transparency in spending. Organizations use purchase requisitions to prevent unauthorized purchases and ensure all spending is properly budgeted and accounted for. It acts as a mechanism for internal control, providing visibility into potential expenditures before they occur. This process helps manage expenses, track pending transactions, and ensure funds are appropriately allocated. It also helps reduce the risk of fraud and duplicate orders by establishing clear protocols for procurement.

Components of a Purchase Requisition

A purchase requisition includes specific information to ensure clarity and proper authorization. The document identifies the requestor by name and department, along with the date of the request and the desired delivery or completion date for the goods or services.

A detailed description of the items or services needed is provided, often including specifications, model numbers, or service types. The quantity of items requested and their estimated unit and total costs are also included. Requisitions often require a justification for the purchase, explaining the business reason behind the request.

The form may also include a suggested vendor, a budget code or cost center for accounting purposes, and a unique requisition number for tracking. This comprehensive detail allows for informed review and approval.

The Purchase Requisition Workflow

The journey of a purchase requisition begins when an employee identifies a need for goods or services and completes the requisition form. After creation, the requisition is submitted to an immediate supervisor or department head for an initial review. This initial review assesses the necessity of the request and its alignment with departmental budgets and objectives.

Upon approval by the initial reviewer, the requisition may proceed through additional levels of approval, depending on the organizational structure and the monetary value of the request. These subsequent approvals might involve the finance department to verify budget availability or a central purchasing department for final endorsement. Once all necessary internal approvals are secured, the purchasing department uses the approved requisition to create an external purchase order, which is then sent to a selected vendor.

Distinguishing Purchase Requisitions from Other Documents

It is important to differentiate a purchase requisition from other common procurement documents, such as a purchase order and an invoice, as each serves a distinct function. A purchase requisition is an internal document that initiates the procurement process by formally requesting goods or services within the organization. It is essentially a request to buy and does not create an external commitment with a vendor.

In contrast, a purchase order (PO) is an external document issued by the buyer to a supplier, representing a formal offer to purchase goods or services. Once accepted by the vendor, the purchase order becomes a legally binding contract outlining the terms of the transaction.

An invoice, on the other hand, is a request for payment sent by the vendor to the buyer after the goods or services have been delivered. It details the amount owed for items received.