Purchase Requisition Best Practices for 2024

What is a purchase requisition?

A purchase requisition is an internal document filled out by an employee to formally request the purchase of goods or services. The purchase requisitions are reviewed by appropriate individuals in the organization, which may include the procurement team and/or the employee’s reporting manager. Only once the purchase requisition is approved purchase orders are issued to a supplier for the requested goods or services. 

Steps in a purchase requisition flow

1. Identification of requirements for goods or services

The first step in the procurement process is the identification of a requirement by an employee to procure certain goods or services. For example, the admin or office manager would identify the need for additional printer cartridges. In contrast, the facilities manager may determine the need for a new coffee machine.

2. Submission of a purchase requisition

Once the purchase requirements have been identified, the employee must complete the purchase requisition form. This form would carry the details of the goods or services being procured, the quantity required, suggested vendor and pricing, and the rationale or the need for the purchase.

3. Manager approval

The purchase requisition submitted by an employee would be routed to the reporting manager or the department head for approval. After evaluating the accuracy and the legitimacy of the requisition, along with its fit within the allocated budget, the requisition may be approved for further processing by the procurement department. 

4. Review by inventory and procurement department

The requisition undergoes a final layer of review by the inventory department. If inventory exists for the goods for which the requirement has been raised, the requisition will be fulfilled from the existing stock. Alternatively, the requisition will be forwarded to the procurement department.

5. Approval from the procurement department

Before signing off on a purchase, the procurement department must ensure that the requisition complies with business policies and/or has been correctly authorized by the line manager or departmental head. The procurement team may reject requisitions and return the request to the requester for additional information or if the request does not comply with the purchasing limits. 

6. Generation of purchase order 

Once the requisition has been approved, a purchase order is created and sent to the chosen supplier. The purchase order carries the items' details, like the quantity, SKU, and the agreed-upon price.

What is included in a purchase requisition?

A suitable purchase requisition should easily facilitate the procurement process by clearly outlining the purchase need and helping the procurement team obtain sufficient information to authorize the purchase. A typical purchase requisition would require the following details - 

• Name and department of the employee requesting the purchase
• Date of the request
• Goods or services to be procured
• Details of the goods or services - item type, quantity, price
• Reason for the purchase
• Name of the suggested supplier(s)

Benefits of implementing a purchase requisition process

1. Streamlined purchasing process

Implementing a centralized procurement and accounts payable process with purchase requisitions creates visibility and standardizes the purchasing process. Employees are aware that they must raise a request to get managerial approval, after which only an order will be placed with the supplier.

2. Fraud prevention

Requiring purchase requisitions before placing an order with the supplier ensures the request's legitimacy. An approved purchase requisition ensures that the requirement carries the requisite approvals and is within the allocated budget. It thus ensures that employees cannot misuse the company’s funds and keeps maverick tail spend in check.

3. Prevents duplicate orders

Since a purchase requisition undergoes thorough checks by the inventory and procurement department, it also ensures that orders are not placed for duplicate items or services. The centralized procurement team also ensures that multiple employees from different teams, departments, or locations do not place the same order with one or more suppliers.

4. Simplifies compliance

Purchase requisitions simplify compliance as they prove purchase decisions during audits. They carry all relevant information like requester details, rationale for the purchase, and supplier details, facilitating compliance for audits. 

5. Saves cost

Consolidating procurement and purchase requisitions at a central level helps companies control costs. The procurement team could identify suitable suppliers and even negotiate better prices. Further, by ensuring all purchase requisitions fall within the allocated budgetary limits, companies can also improve their spend management.

Automating the purchase requisition process with P2P Automation

Automating the purchase requisition process improves productivity, minimizes errors, and fastracks the procurement process. The following steps will need to be followed to automate purchase requisitions - 

1. Outline the process of purchase requisition

The first step to implementing an automated purchase requisition process is to outline the step-by-step process. It involves outlining the requirements in the purchase requisition, the approvals required, and the conditions to be met for completing the process.

2. Create requisition forms

The company’s requirements from a purchase requisition should then be converted into digital forms, which will capture the employee’s details and other necessary information for the requisition.  

3. Customize and automate workflows

The purchase requisition and approval workflows should be customized to support the company’s existing policies and processes. Routing approvals to relevant stakeholders and teams, purchasing limits, or any exceptions to standard workflows should be built into the system.

4. Integrate with existing systems

If your company creates purchase orders in the accounting system or any other procurement software, it is essential for your purchase requisition system to also integrate with the existing systems. 

Key takeaways

• Purchase requisitions help to streamline the procurement process by establishing greater control and accountability over purchases.
• Purchase requisitions help prevent fraud and duplication of orders and simplify audit compliance.
• Automating purchase requisitions and procurement with AP and P2P solutions like ClearTech helps improve productivity, minimize errors, and save costs. 

FAQs

• What is the difference between a purchase order (PO) and a purchase requisition (PR)?

A purchase requisition is an internal document requesting the purchase of goods or services by an employee. The purchase requisition is sent from an employee to the procurement team. The purchase order confirms the request to supply goods or services to the vendor or supplier. The purchase order is an external document sent from the purchasing department to the vendor. 

• What is a PR process in procurement?

With a PR process, goods or services are procured only after a request by an employee has been received and approved by relevant line managers or department heads. It helps to ensure the authenticity and legitimacy of the purchase request being sent to the vendor.

• What is a PR approval?

The line manager and the procurement department must approve purchase requisitions raised by an employee. These approvals are required to ensure the legitimacy of the purchase request. PR approvals help control and save costs by ensuring no fraudulent or duplicate orders are placed and that purchases are made within procurement limits.