A purchase requisition is a document used when an employee needs to make a purchase on behalf of the business. It is a request to purchase, which is sent to the purchasing department of that business. At this point, the purchasing department will choose to either approve, alter or reject the request to purchase but must give reasons for their actions. Once a purchase requisition form has been sent to the necessary department and has been improved, the goods can be ordered and the buying process can begin.
A purchase order is a must for business management. It is a document that confirms an order for construction materials, sent from a buyer to a material supplier, equipment renter or subcontractor. When a purchase order is accepted, it sets basic terms between the parties such as what is being ordered and an agreed price for the transaction at a later date . A purchase order might be followed up with a written contract that further clarifies the relationship and expectations of the agreement.
What are the differences?
The significant difference between a purchase order and a purchase requisition is that a purchase requisition is a document in which one department asks permission from the purchasing department for materials to be ordered and the purchase order is the document they use to actually buy these materials from the supplier.
Purchase requisitions can be viewed as interdepartmental documents which allows larger businesses to handle and keep track of their orders more effectively.
- A purchase requisition is a document used to record essential information about required purchases.
- Requisitions notify department managers or the purchasing department of the materials to be purchased, and include important details such as which department or employee that is making the request, the cost of the materials, the quantity needed, a reason for the purchase, and the supplier’s name.
- Requisition orders outline what needs to be purchased for the business and why they are necessary, which will grant them permission to make the purchase. These documents are internal and are not shared with outside parties.
- Requisitions may only be necessary for purchases over a set cost amount for some businesses.
Consider purchase orders as a written trail of breadcrumbs. We have all been there when the delivery comes in, and the materials aren’t what was ordered. Without having a written document to fall back on as a reference, there’s no telling where things went wrong. With a clear purchase order in hand, it’s easy to show where the mistake was made.
- A PO (Purchase Order) is what’s needed to actually purchase materials. Purchase orders are only introduced after the purchasing department has approved the purchase requisition.
- After the purchase requisition is approved, the purchasing department sends a purchase order to the supplier. A Purchase order can be created through an electronic purchasing system. A construction purchase order software allows the process to be automated, enhancing efficiency and speed while also allowing the process to be easily tracked.
- Information typically included in a PO includes the company’s name who is making the purchase, a description of the materials being ordered, the price of the materials being ordered, the company address, payment terms, purchase order number, and invoice address.
- To simplify the process, purchase orders can be identified using the same number as the number applied to the purchase requisition.
Benefits of using purchase requisitions
Construction businesses will constantly need new materials. With this, an initial request to purchase begins the process. The purchasing department will be able to validate any departments request to purchase goods. This document provides evidence that communication was made between both the purchasing department and the department wishing to order the goods.
Requisition orders significantly reduce the chance of fraud being committed. The chances of employees or managers trying to steal from the business is reduced. Having a requisition form provides proof that the goods were ordered and that a delivery was made.
A purchase requisition form must go through several hands before the purchase is actually made. The department manager and purchasing department will have to check thoroughly before it is sent to the vendor. This reduces the chance of any mistakes being made or incorrect materials being ordered.
Having all purchase requisitions go through one department makes the buying process a lot easier. It may also allow the business to engage in economies of scale as they can bundle together purchases and negotiate a better price from suppliers.
A requisition form requires both employees and managers to justify purchasing materials. Writing down why these materials need to be purchased can save the business money that may have been sent orders unnecessary materials.