Who Is Responsible for Creating a Purchase Order?
Navigate the multi-faceted process of purchase order creation. Understand the key roles and responsibilities involved from start to finish.
A purchase order is a formal commercial document issued by a buyer to a seller. It clearly indicates the types, quantities, and agreed-upon prices for products or services a business intends to acquire. Its purpose is to formalize a procurement request, establishing clear terms and expectations for both parties. This document helps businesses manage spending and ensures purchases align with operational needs. Once accepted by the seller, a purchase order becomes a legally binding agreement.
The Requisitioner’s Role
The process of acquiring goods or services begins with a requisitioner, an individual or department that identifies a specific need. This initial step involves creating an internal purchase requisition detailing the items or services required. The purchase requisition outlines essential information such as the item needed, quantity, justification, and often a preferred vendor.
The requisitioner also specifies the appropriate budget code, ensuring the expense is allocated correctly within the company’s financial framework. While responsible for initiating the request and providing comprehensive details, they generally do not create the final purchase order. Their role is to clearly communicate the demand to the purchasing department.
The Purchasing Department’s Role
The purchasing department holds the primary responsibility for the creation and issuance of the purchase order. Upon receiving an approved purchase requisition, this department reviews the details, verifying the need and ensuring it aligns with company policies. The purchasing team may then engage in vendor selection, especially if better options are available based on price, quality, or delivery terms.
Negotiation of terms is a significant responsibility, encompassing pricing, delivery schedules, and payment conditions. This department ensures compliance with internal spending limits and any existing vendor agreements. Once all terms are finalized and approvals are secured, the purchasing department generates the purchase order, assigning it a unique number for tracking, and formally issues it to the selected vendor.
The purchasing department maintains detailed records of all purchase orders, which are essential for tracking expenditures, managing inventory, and facilitating future audits. This record-keeping is a fundamental aspect of financial control and transparency within an organization.
Management and Finance Roles
Management plays a crucial role in the approval process. Department heads or senior leadership provide authorizations, ensuring proposed purchases align with departmental budgets and broader strategic objectives. This approval mechanism acts as a control point to prevent unauthorized spending and ensure fiscal responsibility.
The finance or accounting department handles the financial aspects of the transaction. They process the purchase order for payment, reconciling invoices received from vendors against the original purchase order and records of goods received. This three-way matching process is a standard financial control that verifies transaction accuracy before payment is disbursed. The finance team also manages financial implications, tracking expenditures, and supporting internal and external audits.
Organizational Structure Variations
The purchase order process varies significantly based on an organization’s size and structure. In smaller businesses, a single individual, such as the owner or an administrative assistant, might fulfill multiple roles. This person could be responsible for identifying needs, creating requisitions, negotiating with vendors, and handling financial reconciliation.
As businesses grow, roles tend to become more specialized. Larger organizations typically have dedicated purchasing departments, separate finance teams, and multi-layered management approval structures. This specialization enhances efficiency and control, but the core steps of identifying a need, formalizing the request, securing approvals, and issuing the purchase order remain consistent.