Purchase Requisition vs. Purchase Order: How Is It Different?

In any business that deals with purchasing goods or services, you’re likely to encounter the terms “purchase requisition” and “purchase order.” While both relate to the procurement process, they refer to distinct steps with different roles and requirements. Understanding the purchase requisition vs purchase order difference is important for maintaining an efficient and compliant purchasing process.

To clarify the key distinctions, let’s start by defining each term:

Purchase Requisition

A purchase requisition is an internal document that kicks off the procurement process. It is a request from an employee to the purchasing department to acquire specific goods or services. The requisition includes details like the requested items, quantities, required delivery dates, cost estimates, and the rationale for the purchase.

Purchase Order

A purchase order is a commercial document issued by the buyer to a supplier or vendor after the purchase has been approved internally. It is a binding contract that authorizes the vendor to provide the products or services outlined in the order and obligates the buyer to remit payment according to the purchase order terms.

Now that we’ve covered the basic definitions, let’s dive deeper into how to purchase requisitions vs purchase orders differ across several key areas:

Submission and Approval

Purchase requisitions are initiated by employees within the organization who identify a need for certain goods or services. The requisition then goes through an internal approval workflow before being converted into a purchase order that gets sent to a vendor.

The approval process is a crucial part of the requisition stage. It allows management to review purchases for necessity, pricing, budget allocation, and compliance with purchasing policies. Implementing a formal documentation review process with spending controls helps prevent unauthorized purchases, overspending, and misuse of funds.

Legal and Financial Commitments

One of the biggest differences is that a purchase requisition carries no legal or financial commitment for the buyer. It is simply an internal request that outlines the desired purchase. The legal obligation occurs when a validated purchase order is issued to and accepted by the supplier.

The purchase order represents a contractual commitment by the buyer to pay the vendor upon fulfillment of the order terms. It specifies all details like product descriptions, quantities, pricing, delivery dates, payment terms, and other conditions that are binding on both parties.

Role of Purchasing Department

The purchasing department does not get involved until the requisition stage is completed and it’s time to convert the approved internal request into an official purchase order to send out to vendors.

At the requisition phase, the purchasing team may assist with providing supplier recommendations, product specifications, and estimates during the documentation review process. However, their primary role is managing the purchase order process – evaluating supplier quotes, negotiating terms, and issuing legal purchase documentation to vendors.

Document Flow and Processing

Purchase requisitions follow an inward-facing workflow, originating from employees within the organization before going through management’s approval process. Purchase orders flow outward, getting issued to external suppliers by the purchasing department once all internal approvals are obtained.

As requisitions are fulfilled by issuing a purchase order, there needs to be a tight integration between the two document types and processes. Companies implement procurement solutions and document management systems to streamline and automate the flow between internal requisitions and externally issued purchase orders.

Order Tracking and Record-Keeping

While requisitions establish the initial request and approvals for a purchase, the purchase order is the document referenced for order tracking, accounts payable processing, and spend record-keeping.

The requisition request itself does not get shared externally. It exists only as an internal record to justify the purchase and provide an audit trail of the approval process. The purchase order is the key reference document that suppliers use to fulfill the order accurately and generate invoices for payment.

As this comparison illustrates, purchase requisitions and purchase orders are interrelated but distinctly different documentation tied to separate roles and process phases within the purchasing cycle.

Requisitions capture and vet purchasing needs before any commitments are made, while purchase orders represent the formal agreement with suppliers to execute the approved purchase. Having a clear purchase requisition vs purchase order process with the right documentation review controls is essential for purchase transparency and procurement best practices.

Whether you’re a small business or a large enterprise, maintaining control over purchasing starts by understanding and properly implementing both requisition and purchase order processes. With the efficiencies of digital procurement solutions, you can streamline and integrate the flow between both stages for optimal spend management.

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