In this article we explain the basics around Purchase Requisitions vs Purchase Orders for any organisation looking to implement a full Purchase Order Process, or for those struggling to control costs.

All businesses buy goods and services in some shape or form.  Adopting a standardised approach and putting rules in place not only provides an audit trail, but avoids overspend and in extreme cases, instances of fraud.

But where to start and what's the difference between a Purchase Requisition and a Purchase Order?

The main difference between a Purchase Requisition and a Purchase Order is that a Purchase Requisition is an internal document created and submitted within the organisation to request goods.  A Purchase Order is an external document sent to a supplier to buy the goods.

A Purchase Requisition is created by an employee and is sent to the Finance or Purchasing Department where it will be approved, adjusted or rejected.

Each Purchase Requisition should be given a unique number so it can be tracked throughout the entire process, and additionally,provide an audit trail for procurement.  At this stage you are not yet buying anything, but starting the process.

For some organisations, Purchase Requisitions are only needed when the value of goods required is above a certain threshold, for others it will be required for every purchase.

A Purchase Requisition document will contain standard information such as the purchasers name, their department, description and quantity of items, name of intended supplier and the expected price.

A Purchase Order is the next step in the process and is produced once a requisition has been internally approved.  This document issent out to a supplier and acts as a binding contract for all parties.  

A Purchase Order will often be assigned the same reference number as the Purchase Requisition so they can be filed together.

A Purchase Order will consist of very similar information to the requisition document but with the addition of the purchasing company's contact details, payment terms, invoice instructions, delivery address and PO number.

Having both documents in placestops employees placing orders directly with a supplier, ensuring all purchases are agreed by the business and bought from an approved supplier.

It also greatlyimproves record keepingand provides evidence of all purchases for tax purposes.  A verbal commitment to buy or sell should never be enough and proof of the entire ordering process is always a better option.