What is a purchase order and purchase request? When are they necessary?

The procurement process is a procedure that involves sourcing goods or services necessary for an organization. It begins with clearly identifying needs and selecting suitable vendors. Then, purchasing orders are placed, and items are delivered according to requirements. Upon receipt, the quality and correctness of the items must be checked, followed by processing payments and recording transactions accurately. Efficient procurement ensures smooth operations and effective cost management for the organization.

What is a Purchase Requisition?

A Purchase Requisition (PR) is a document used by employees or departments within an organization to request approval for purchasing goods or services from a manager or the purchasing department before issuing a purchase order.

The process of a Purchase Requisition involves the following steps:

1. The employee needing the goods/services fills out the purchase requisition form.
2. The form is sent to the department head or relevant parties for review.
3. Once approved, the requisition is forwarded to the purchasing department.
4. The purchasing department considers and compares prices, then issues a Purchase Order (PO).
5. The Purchase Order is sent to the supplier to process the delivery of goods.

What is a Purchase Order?

A Purchase Order (PO) is a document issued by a buyer to a seller to confirm the purchase of goods or services, detailing the specifics of the products, quantities, prices, and payment terms.

Purchase Requisitions and Purchase Orders hold significant importance in businesses and organizations, especially when dealing with bulk purchases or requiring account evidence. Examples of cases where they should be used include:

• A Purchase Requisition is used when a department needs to buy goods and requires manager approval.
• A Purchase Order is used once approved by the purchasing department and is needed to place actual orders with suppliers.
• When the organization needs to control budget and spending.
• As evidence to validate purchase orders and check items.
• When documents are needed for accounting audits.

Advantages of Using Purchase Requisitions and Purchase Orders

Utilizing Purchase Requisitions and Purchase Orders enhances clarity and accuracy in transactions, offering several benefits:

• Helps reduce errors in ordering.
• Creates transparency in the procurement process.
• Serves as legal evidence if disputes occur.
• Enhances inventory management efficiency.
• Allows clear tracking of order status.