Is there a difference between Purchase Requisitions and Purchase Orders?
A robust purchasing process is important to all business, whatever its size or nature. Larger companies may well have established a Purchasing or Procurement department which is responsible for placing Purchase Orders with nominated suppliers. Other staff then raise Purchase Requisitions internally, for goods or services that they require as part of their job, that are submitted to the Purchasing department for action.
So, what’s the difference between the two? A Purchase Order, once issued to the supplier is a contractual document, requiring the supplier to deliver the required goods or services under the terms and prices stated, and allows the supplier to invoice for those items supplied. A Purchase Requisition, being an internal document, is simply a request that may or may not be approved and result in an official Purchase Order.
In practice however, a properly structured PO system, with workflow approvals, giving the ability for approvers to challenge or cancel a PO before it goes to the supplier, can for many organisations mitigate the need for the requisition stage. This is especially relevant in the fast pace of business today and ‘just in time’ purchasing.
A structured Purchase Order system will be based on the rules required by that individual business’s processes, and will have the functions for those raising the PO’s to give justifications for the required goods or services, attach supporting documents (such as quotes) and only be able to select suppliers from an approved list. Approvers (potentially to include the Finance department) have the ability to reject, cancel or escalate PO’s at any stage, and with Budget Control can ensure nobody can overspend levels set. So, PO’s can be challenged internally taking account of issues such as potential fraud, before the PO is released to the supplier.
A proper Purchase Order system, with the controls indicated, can for many companies, take out the need for the Purchase Requisition stage. Click here for more information on the Cloud B2B range of purchasing and purchase to pay supplier invoice solutions, or select from the menu at the top of the page.
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