When defining requisitions and purchase orders, it’s important to know not only how they are different, but what they stand for. Both key documents are used to managed cost within a business or company. They both not only have control over employee and manager spending but also increase the chance of receiving discounts on goods and services, due to the greater visibility into purchasing.
A purchase requisition is a document that requires permission before purchasing an asset, while a purchase order is exclusively about purchasing.
The purchase requisition starts with a request form. Once it’s created and submitted to the corrected department that controls finances, it will then go through a series of “checks” to ensure its proof, financial ability, and legitimacy. Once it’s clear, then the person or department is approved to go ahead and order the asset needed. With the purchase requisition, you are not ordering anything, but instead, are getting the approval to do so.
These types of approvals can range from a large private university trying to order goods over $5,000, to a healthcare facility or dental clinic requesting medical supplies, or even a company ordering office supplies. The clinic would then share this document directly with the purchasing department for approval, rejection, or further discussion. While purchase requisitions can fluctuate depending on business needs, they typically involve the following: purchaser’s location or internal department, the quantity and general description of supplies requested, the name of the vendor that is providing the goods, and the price.
The purchase order is basically where the buying happens. Once the procurement department approves the purchase requisition and gives the approval to order the desired goods, they will then issue the order to the correct vendor. These orders are typically purchased and created using electronic purchasing systems. This will then allow the business to track the purchase order and submit them electronically.
Purchase orders would generally include the name of the company purchasing the goods or services, the description and quantity of the goods or services, price, a mailing address, payment information and terms, invoice address, and a purchase order number.
Purchase orders are also important documents for vendors as well. Vendors can use them for order fulfillment and processing payments. Once the PO is submitted, the vendor would then voice any concerns. After any issues are dealt with, the order is shipped. The vendor then sends an invoice for the goods or services to be paid by the purchaser.
Typically, both purchase requisitions and purchase orders are both important due to its ability to managed finances. They also help with not only managing costs and inventory, but they help businesses avoid duplicate or missing orders, clarify important details, stay protected against financial audits, and protect both purchasers and vendors.