Both purchase requisitions and purchase orders are an important part of procurement. Despite their similarities, there are a few differences you need to know if you want a better understanding of your purchasing processes.
A purchase requisition acts as the start of the purchasing process, a request made by an employee or department for goods or services. The request then goes to the appropriate user for review and approval. Depending on the company, the request might be a physical document requiring real signatures or the process could be entirely digital thanks to purchase requisition software.
During this stage, the person making the request should include important information regarding what the product is for, how much it will cost, and which vendor should be used. The idea is that the requisition should be as clear as possible so whoever is in charge of approvals can make the best decision in a short amount of time.
Along with providing records of all company purchases, these documents offer visibility into spending patterns so organizations can better control costs. For example, a company can compile past requisitions into a catalog detailing pricing and other spending habits.
Purchase orders or POs are the financial documents issued to vendors when buying a product or service. A PO typically includes details on the quantity required, pricing, and shipping or delivery data. All of this information can be taken from the preexisting purchase requisition. The document is then sent to the vendor, starting the purchase process on their end. At this point, it becomes legally binding.
Purchasing workflows used to require a lot of manual processes, especially when it came time to collect signatures for approvals. Purchase order software is a key part of automating the process by digitizing the creation of POs, letting users find and share them without any physical paperwork. This also makes recurring orders easier, as they can be automatically sent on a scheduled basis to keep supply levels steady.
At a glance, POs and purchase requisitions appear the same: documents for buying goods or services. Yet the most obvious difference between a PO and a purchase requisition is that the former is an external document sent out to a vendor while the latter is meant to be kept internal. Additionally, the PO creates a legal contract between the vendor and buyer. A purchase request is not binding in any way.
Anytime someone in your company desires a purchase to be made, they will go through the approval process:
As such, a purchase requisition will always come before a PO. Some companies may skip the purchase requisition and move straight to the PO, especially on repeat orders from trusted vendors. However, both are preferred as they can create a clear trail of company purchases, including changes in costs and vendors.
Both purchase requests and orders are an important part of procurement. They can show a requisition’s approval status, a company’s overall spend analysis, and even contact details for vendors. And by containing everything in a digital format, there’s a reduction in human error. If you want to streamline your purchasing processes, check out our software recommendations for the best purchase requisition and PO solutions**.