The Importance Of Purchase Requisitions In Procurement
To avoid fraud, usually, department managers are not allowed to place orders with suppliers directly. Whenever supplies are running low, department managers hand purchasing managers a purchase requisition to inform them about the materials that are needed.
Once the purchasing department receives a purchase requisition, they fill in purchase orders to actually place the order with suppliers.
But what are Purchase Requisitions? Why are they important? And how do they differ from Purchase Orders? Read on to find out.
What are purchase requisitions?
A purchase requisition is an internal document used by employees to inform department managers about the resources they need. This document is then used by department managers to notify the purchasing department that they can start the purchasing process.
The finance department also uses the purchase requisition to coordinate reporting procedures with the accounting department.
Why are purchase requisitions important?
The purchase requisition process plays a key role in the buying process of an organization. It ensures that fraud is prevented, and organizations get the value for their money. This is possible due to the fact that the request must go through a number of approvals to ensure its accuracy, as well as need.
With such a process in place, the purchasing department does not order goods directly from the suppliers. Instead, a formal request must be issued first, and purchasing managers have to decide on the necessary action.
They can approve the request, adjust it, or even reject it. Although, if they reject it, they must specify their reason for doing so (need, available budget, etc.).
Approving the requisition gives the purchasing department the right to create a purchase order. This is basically a formal request sent to suppliers that notifies them of the intention to make a purchase.
By using purchase requisitions as proof, it becomes easy to trace goods. When organizations require that all requests be made centrally through the purchasing department, it becomes easy to handle the entire procurement process.
Centralized procurement streamlines the complete buying process and reduces delays, which considerably benefits organizations’ efficiency levels.
The benefits of using purchase requisitions
Besides the fact that it prevents fraud, there are several benefits to issuing purchase requisitions. Here are a few:
1. You can avoid duplicate orders
If only one person would be in charge of making purchases, keeping track of orders would be easy. But for larger organizations, purchase requisitions can keep track of what’s needed, by whom, and when.
2. They are useful for financial audits
Some financial audits require evidence that managers approved the company’s purchasing decisions. Purchase requisitions (as well as purchase orders) can be used as proof for these audits.
3. They help you organize orders
This one’s pretty obvious, but having a well-organized purchase system makes it easy to identify what products are coming in at any time. This makes inventory management a lot easier.
4. They prevent miscommunication
Purchase requisitions clearly communicate the details of a purchase. By having every aspect clarified and written down, organizations can avoid potential conflict or confusion in the future.
5. They’re legal documentation
Even though purchase requisitions are internal documents, they can serve as legal documentation that can be enforced should any issues over what was ordered, or the agreed-upon price arise.
Not yet convinced? Check out this blog article where we addressed the common objections against the use of purchase requisitions.
The Purchase Requisition format
The contents of the purchase requisition form vary depending on the organization and the products requested, but the template should contain these basic elements:
the name of the requestor
the date of the request
the items, actions or services requested for
the date of delivery
the location of the delivery
the department in charge of making deliveries
the signature of the requestor.
For more information on how to create a purchase requisition workflow, check out our dedicated article.
Purchase Requisitions are not Purchase Orders
Here’s how they differ:
Check out this article where we talk about when to use Purchase Requisitions and Purchase Orders.
Prokuria, your purchase requisition software
To simplify the process, some organizations utilize technology to manage requisitions. We’re also happy to announce that Prokuria now comes with a purchase requisition feature to help your employees improve their efficiency. The form is filled in online and then sent to the person in charge. No more paper, better visibility! You should check it out.
For smaller businesses, having such a bureaucratic purchasing process in place may seem a waste of effort and resources. But for larger organizations, this process, even if it’s tedious and slow, ensures transparency and cost savings. And who doesn’t want to spend less and get more?
Are you ready to automate your purchasing process with Prokuria? Try the FREE demo now and see how easy it is to manage your purchase requisitions.