Why is Purchase Requisition Important in Structuring your Business?

2018-03-05

There are many articles explaining purchase orders. But there is still a key term that causes confusion and mixup purchase requisition. In this article, let’s discuss the difference between the purchase order and purchase requisition and the importance of purchase requisitions in your organization.

Understanding the difference

Purchase requisitions are documents used when employees need to make a purchase or an order request on behalf of their company. This document helps to inform the department managers or the purchasing officer of the decision so that the purchasing department can begin with the purchasing process. The finance team will then use this document to coordinate the reporting procedure with the accounting department as well.

Purchase orders are issued by the purchasing department after a purchase requisition has been made and passed the approval process. They are documents sent from a purchaser to a supplier with a request for an order and is a legitimate binding document.

The Importance of a Purchase Requisition in a Business Organization

In any business association, there is dependably the requirement for supplies or materials and equipment, these might be office supplies, consumables, machines and other equipment.

What is probably going to happen when a business enables departmental managers to put orders directly with the suppliers? The appropriate response for this is that there is a probability of fraud. To prevent this, a procurement department is frequently made to place the orders with the vendors and to regulate purchase requisition workflow. Inside this department, comes a purchase requisition process set up to be followed to guarantee that fraud is prevented, and the business gets a value for the money.

One of the internal document that is utilized as a part of the department for a requisition order is a purchase requisition form. Using this process, the procurement department does not order goods directly from the sellers, rather there must be a formal purchase requisition form from a given division, for this situation, one where a given supply will be used, and after that an approval process is taken after, giving the organization internal control over the purchase requisition process.

For instance, the department of finance might be keen on purchasing new financial software to make their work less demanding and enhance security. The head of the finance department or the individual whose duty is requisition will make a formal demand for the software. He or she won’t do this by word of mouth, instead, there must be some substantial documentation in a purchase requisition form. It is on the quality of this document the purchasing department will start the procurement process until the department of finance gains a new system.

In this situation, the purchase requisition is a formal report that is employed by department chiefs to make a request for materials, which are required. Upon materials running low, the departmental managers fill the requisition form, demonstrating the amount required, and in addition a few insights about the vendor and the order. At the point the purchasing department gets the requisition form, they should experience it and make a move. The action can be approval, alteration or even denying the request, however for this situation, they should give reasons with reference to why they have come to this decision. Approval of the requisition gives the department the authority to make a purchase order, which is essentially an order, to be sent to the seller telling them of the goal to make a purchase.

So Why is the Purchase Requisition Important in the Procurement Process?

It Initiates the Purchasing Process

Departments in a business will, now and again, require materials; the purchasing request will start the purchasing process. The purchasing department will follow up on the quality of the document. In case of any issues, the document will serve as a proof that a given communication was made.

It is a Control Tool

Where there are no appropriate checks, a departmental chief or staff may take part in the fraud, where they order materials for individual use. With a formal purchase request for, there are measures set up to guarantee that no fraud is practiced. The request must go through various hands to guarantee its precision as well as need. The departmental supervisor will observe it before sending it to the purchasing division where it experiences further investigation before a purchasing order is sent to the vendor. It is a formal method for issuing a notice that a given material is required, with it there is proof that a department asked for the supplies. This is essential for reviewing purposes so you won’t have a circumstance where some individual at the purchasing division starts a request pretentiously. The report can simply be counterchecked to find out the facts.

Securing the Business

With requisition orders set up, odds of fraud are prevented. There will be probably no circumstance where staff or departmental managers plot with vendors to take from the business. The organization resources are likewise secured. A requisition order is an evidence that a specific resource was requested, it can be followed up on, discovering whether a delivery was made. With this document, it turns out to be simple to follow resources in case there are any issues in regards to organization resources.

Centralization of the Procurement Process

At the point when a business association requires that all orders be made centrally through the purchasing department, it turns out to be easy to deal with the entire process. In this manner, the purchasers benefit, as now they can bundle purchases and use the business association’s purchasing power to negotiate better or more favorable terms. A centralized purchasing system additionally fastens the procurement process, this implies there is an insignificant number of departmental delays, something that greatly influences a business organization’s proficiency levels.

A purchase requisition might be viewed as a mere document however it plays an essential part in the procurement process of a business organization. It is a control tool, and a fraud control document and in addition a vital part in approving purchases in a business.

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