Purchase Requisition

A purchase requisition is a formal document used to request goods or services within an organization. It outlines key details such as item descriptions, quantity, delivery timelines, and budget allocation. Once approved, the purchasing department reviews the request and initiates the procurement process. This essential step ensures that all purchases align with company policies, budget constraints, and operational needs, helping organizations maintain financial control and procurement efficiency.

Key Takeaways

Purchase Requisition

A purchase requisition (PR) is an internal document used by organizations to request the purchase of goods or services from a supplier. It is a critical step in the procurement process, ensuring that purchases align with company policies, budget constraints, and business needs. This guide will provide a detailed breakdown of purchase requisitions, including their importance, key components, and best practices for optimizing the process.

What is a Purchase Requisition?

A purchase requisition is a formal request generated by an employee or department to procure goods or services. It is submitted to the purchasing department for review, approval, and eventual conversion into a purchase order (PO).

The PR process helps organizations maintain financial control, transparency, and compliance by ensuring that every purchase is necessary, budgeted, and approved by the relevant authorities.

Why Are Purchase Requisitions Important?

Purchase requisitions play a vital role in procurement by:

• Preventing unauthorized spending and fraud.
• Ensuring budget compliance and cost control.
• Standardizing procurement requests across departments.
• Providing an audit trail for financial and regulatory compliance.
• Improving efficiency and accountability in purchasing decisions.

Step-by-Step Purchase Requisition Process

1. Initiation of the Purchase Requisition

The purchase requisition process begins when an employee or department identifies a need for goods or services. This could include office supplies, marketing materials, IT equipment, or professional services.

Example:
A manufacturing company’s maintenance team requires new safety gear. The department head submits a purchase requisition detailing the required items, quantities, and estimated costs.

2. Key Components of a Purchase Requisition

A well-prepared PR includes:

• Description of Items: Detailed specifications (brand, size, quantity).
• Quantity Needed: Exact number of units required.
• Justification for Purchase: Business purpose for acquiring the items.
• Delivery Requirements: Desired delivery date and location.
• Estimated Budget: Cost projections and financial department codes.
• Approvals: Signatures or digital authorization from department heads.

3. Approval Workflow

Once submitted, the PR goes through an approval workflow, which may involve:

• Department Head Review – Ensuring necessity and compliance.
• Budget Review – Confirming available funds.
• Procurement Department Review – Evaluating vendor options and purchase feasibility.

Note: In automated procurement systems, PRs move through a digital workflow for faster approvals and tracking.

4. Purchase Order (PO) Generation

Once approved, the purchasing department converts the PR into a purchase order (PO) and issues it to the vendor. A PO is a formal contract that specifies order details and payment terms.

5. Order Fulfillment & Receipt

• The vendor delivers the requested items.
• The department inspects the goods to ensure they meet specifications.
• If everything is in order, the finance team processes the payment.

Manual vs. Automated Purchase Requisitions

Best Practice:

Organizations using ERP systems (e.g., SAP, Oracle, Microsoft Dynamics) can automate PR workflows, reducing approval times and ensuring compliance.

Common Challenges in the Purchase Requisition Process

1. Delays in Approval – Long processing times can cause procurement bottlenecks.
2. Incomplete Information – Missing details can lead to rejected requests.
3. Budget Constraints – Requests exceeding budgets may require adjustments.
4. Vendor Selection Issues – Lack of vendor analysis can result in poor procurement decisions.

Solution: Implement purchase requisition software to automate workflows, enhance transparency, and improve approval turnaround times.

Industry-Specific Considerations

Manufacturing:

• PRs may require approval from engineering teams for equipment purchases.
• Vendor compliance with ISO 9001 standards is crucial.

Healthcare:

• Compliance with HIPAA regulations (in the U.S.) for medical equipment procurement.
• Strict approval processes for pharmaceuticals.

IT & Software:

• Requires validation of software licensing agreements.
• IT security approval may be necessary for cloud-based services.

Key Takeaways

• A purchase requisition is an internal request document that ensures controlled and compliant procurement.
• The PR process includes submission, approval, vendor selection, purchase order generation, and fulfillment.
• Automating purchase requisitions via ERP software improves efficiency, compliance, and cost control.
• Industry-specific regulations, budget constraints, and workflow automation should be considered when optimizing PR management.

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