Important Differences Between Purchase Requisition and Purchase Order

Recently updated on August 20th, 2023 at 11:52 am

Purchase Requisition

A purchase requisition is a formal document used to request the purchase of goods or services. It is usually initiated by a department or employee within a company who needs the items or services, and it is typically reviewed and approved by the appropriate personnel before a purchase order is issued to the supplier. A purchase requisition typically includes details such as the item or service being requested, the quantity needed, the requested delivery date, and the budget or cost center that will be charged for the purchase. It serves as an internal control tool for the company and it is a legally binding document.

A purchase requisition is a document or electronic request submitted to a company’s purchasing department to acquire goods or services. It typically includes details such as the item or service being requested, the quantity needed, the requested delivery date, and the budget or cost center that will be charged for the purchase. The requisition is typically reviewed and approved by the appropriate personnel before a purchase order is issued to the supplier.

Examples of Purchase Requisition

  • A department within a manufacturing company requests a purchase requisition for raw materials to be used in the production process. The requisition would include details such as the specific type of raw material, the quantity needed, and the requested delivery date.
  • An office manager submits a purchase requisition for new office furniture, including details such as the specific types of furniture and the quantity needed, as well as the budget or cost center that will be charged for the purchase.
  • A research lab requests a purchase requisition for scientific equipment, such as microscopes or centrifuges, and includes details such as the specific models and features needed, as well as the budget or cost center that will be charged for the purchase.
  • A hospital submits a purchase requisition for medical supplies, including details such as the specific type of supplies, the quantity needed, and the budget or cost center that will be charged for the purchase.
  • An IT department requests a purchase requisition for new computer equipment, including details such as the specific models and features needed, as well as the budget or cost center that will be charged for the purchase.

Types of Purchase Requisition

There are several types of purchase requisition, including:

  1. Standard purchase requisition: This is the most common type of purchase requisition and is used for routine or regular purchases of goods or services.
  2. Blanket purchase requisition: This type of requisition is used for repeated purchases of the same item or service. It establishes a standing agreement with a supplier for a specific item or service, and is used to simplify the purchase process.
  3. Emergency purchase requisition: This type of requisition is used when a sudden, unexpected need arises and goods or services are needed immediately.
  4. Capital purchase requisition: This type of requisition is used for larger, more expensive items or equipment that are considered a capital expenditure.
  5. Stockless purchase requisition: This type of requisition is used for items or services that are not typically kept in inventory, such as custom-made products or services that are ordered as needed.
  6. Service purchase requisition: This type of requisition is used for services, such as consulting, maintenance, or repair services.
  7. Framework purchase requisition: This type of requisition is used for a framework agreement that established a long-term agreement with a supplier for a specific item or service with the ability to order within the framework agreement.

Purpose of Purchase Requisition

The main purpose of a purchase requisition is to request the purchase of goods or services that are needed by a company. It serves as a formal document that initiates the purchasing process and helps to ensure that the right items or services are obtained at the right time and at the right price.

Additionally, purchase requisition serves several other purposes:

  • It acts as an internal control tool, helping to ensure that all purchases are properly authorized and that the budget is not exceeded.
  • It helps to ensure that the right items or services are obtained at the right time and at the right price.
  • It helps to ensure that the right suppliers are selected and that the best terms and conditions are negotiated.
  • It helps to ensure that the right delivery and payment terms are agreed upon.
  • It serves as a legal document that can be used to support the purchase and payment for the goods or services.
  • It helps to improve the efficiency and effectiveness of the purchasing process by providing a clear, detailed record of the purchase request.
  • It helps to reduce the risk of errors and misunderstandings by providing a clear, detailed record of the purchase request.

Format of Purchase Requisition

The format of a purchase requisition can vary depending on the company’s policies and procedures, but generally it should include the following information:

  • Date: The date on which the requisition was created.
  • Requisition number: A unique number assigned to the requisition for identification and tracking purposes.
  • Department or location: The department or location that is requesting the purchase.
  • Contact person: The name and contact information of the person making the requisition.
  • Description of goods or services: A detailed description of the goods or services being requested, including the quantity needed, specifications, and any other relevant details.
  • Reason for purchase: A brief explanation of why the goods or services are needed.
  • Requested delivery date: The date on which the goods or services are needed.
  • Budget or cost center: The budget or cost center that will be charged for the purchase.
  • Approval signature: A signature from the appropriate personnel who have reviewed and approved the requisition.
  • Purchase order number: A reference to the purchase order that will be issued once the requisition is approved.
  • Supplier: The name and contact information of the supplier from whom the goods or services will be purchased.
  • Special terms: Any special terms or conditions related to the purchase, such as delivery or payment terms.

A purchase requisition form may have different fields to be filled in depending on the company’s policy, but most of the above-listed fields should be included.

Purchase Order

A purchase order (PO) is a legal document that is issued by a buyer to a supplier, formally requesting the purchase of goods or services. It is used to initiate a transaction and to provide the supplier with all of the necessary details about the purchase, including the items or services being ordered, the quantities, the prices, and the delivery and payment terms.

The purchase order serves as a binding agreement between the buyer and the supplier, and once it is signed by both parties, it becomes a legally binding contract. It includes information such as:

  • Purchase Order Number: A unique number assigned to the purchase order for identification and tracking purposes.
  • Date: The date on which the purchase order was created.
  • Description of goods or services: A detailed description of the goods or services being requested, including the quantity needed, specifications, and any other relevant details.
  • Unit price: The price of each unit of the item or service being ordered.
  • Total price: The total cost of the order.
  • Delivery date: The date on which the goods or services are needed.
  • Payment terms: The terms and conditions for payment, such as the due date and method of payment.
  • Shipping information: The shipping address and any special shipping instructions.
  • Signature: A signature from the appropriate personnel who have reviewed and approved the purchase order.
  • Supplier details: The name, address and contact information of the supplier from whom the goods or services will be purchased.

Examples of Purchase Order

Here are a few examples of when a company might issue a purchase order:

  • A clothing retailer needs to order new inventory for their store, so they issue a purchase order to a clothing supplier for a specific quantity of shirts, pants, and dresses. The purchase order includes the item numbers, colors, sizes, and prices for each item, as well as the delivery date and the payment terms.
  • A construction company needs to order materials for a new building project, so they issue a purchase order to a building supply company for lumber, concrete, and other materials. The purchase order includes the item numbers, quantities, and prices for each item, as well as the delivery date and the payment terms.
  • A software development company needs to purchase new software licenses for their employees, so they issue a purchase order to a software vendor for a specific number of licenses. The purchase order includes the product names, quantities, and prices, as well as the delivery date and the payment terms.
  • A school district needs to purchase new classroom equipment, so they issue a purchase order to an educational supply company for desks, chairs, and other equipment. The purchase order includes the item numbers, quantities, and prices for each item, as well as the delivery date and the payment terms.
  • A hospital needs to purchase new medical equipment, so they issue a purchase order to a medical equipment supplier for a specific number of MRI machines, X-ray machines, and other equipment. The purchase order includes the item numbers, quantities, and prices for each item, as well as the delivery date and the payment terms.

Types of Purchase Order

There are several types of purchase orders that can be used, depending on the needs of the buyer and the supplier:

  1. Blanket Purchase Order: A blanket purchase order is used when a buyer wants to place a standing order for goods or services, with the supplier. The buyer will specify the terms and conditions of the order, such as the quantity, price, and delivery schedule, but the supplier can fulfill the order as needed over a period of time, rather than all at once. This type of purchase order is useful for items that are frequently used or for services that are needed on an ongoing basis.
  2. Scheduled Purchase Order: A scheduled purchase order is used when a buyer wants to place an order for goods or services, but the order will be fulfilled over a period of time, rather than all at once. This type of purchase order is useful for items that are needed at specific intervals or for services that are needed on a regular schedule.
  3. Repeating Purchase Order: A repeating purchase order is similar to a blanket purchase order, but it is automatically generated at a set interval, rather than requiring the buyer to manually create a new purchase order each time. This type of purchase order is useful for items that are frequently used or for services that are needed on an ongoing basis.
  4. Stock Purchase Order: A stock purchase order is used when a buyer wants to purchase goods that are immediately available in the supplier’s inventory. The buyer will specify the terms and conditions of the order, such as the quantity, price, and delivery schedule, and the supplier will fulfill the order as soon as possible.
  5. Service Purchase Order: A service purchase order is used when a buyer wants to purchase services rather than goods. This type of purchase order is useful for services that are provided on a one-time basis or services that are provided on a recurring schedule.
  6. Urgent Purchase Order: An urgent purchase order is used when a buyer needs goods or services immediately. This type of purchase order is used when a buyer needs to place an order for goods or services that are needed immediately, such as an emergency replacement of a broken piece of equipment.
  7. Drop Ship Purchase Order: A Drop Ship purchase order is used when a supplier ships the goods directly to the end customer on behalf of the buyer, who may be a wholesaler or retailer. This type of purchase order is useful when the supplier has the goods in stock and can ship them immediately, while the buyer doesn’t need to hold inventory in warehouse.

Purpose of Purchase Order

The purpose of a purchase order is to document a legally binding agreement between a buyer and a supplier for the purchase of goods or services. It serves as a formal request for the supplier to provide the specified goods or services at a specific price and within a certain timeframe.

A purchase order serves several important purposes:

  • It clearly communicates the details of the purchase to the supplier, including the items or services being ordered, the quantities, the prices, and the delivery or performance schedule. This helps to ensure that both the buyer and the supplier have a clear understanding of the terms of the purchase.
  • It provides a formal record of the purchase for both the buyer and the supplier. This can be important for accounting and budgeting purposes, as well as for tracking the status of the purchase.
  • It serves as a legal document that establishes the buyer’s commitment to pay for the goods or services being ordered. This helps to protect both the buyer and the supplier in case of any disputes or misunderstandings.
  • It helps to ensure that the goods or services are delivered on time and at the correct price. This can help to avoid delays or additional costs that can arise from misunderstandings or miscommunication.
  • It can be used as a reference for future orders or negotiations, and it can be used to track the supplier’s performance.

Comparison Between Purchase Requisition and Purchase Order

Purchase Requisition   Purchase Order
A document used to request the purchase of goods or services A legally binding agreement between a buyer and a supplier for the purchase of goods or services
Used to initiate the purchasing process      Used to confirm and finalize the purchasing process
Typically created by the department or individual in need of the goods or services Typically created by the procurement or purchasing department
May require approval from multiple levels of management before being submitted Typically requires approval from the procurement or purchasing department before being sent to the supplier
Does not legally obligate the buyer to purchase the goods or services Legally obligates the buyer to purchase the goods or services at the agreed upon terms and conditions
May include multiple items or services                Typically includes a single item or service
May be used for budgeting and planning purposes Used for accounting and tracking purposes

Important Differences Between Purchase Requisition and Purchase Order

Purchase Requisition and Purchase Order are two different documents used in the purchasing process.

A Purchase Requisition is a document used to request the purchase of goods or services. It is typically created by the department or individual in need of the goods or services, and may require approval from multiple levels of management before being submitted. The purpose of a Purchase Requisition is to initiate the purchasing process, and it may be used for budgeting and planning purposes.

A Purchase Order, on the other hand, is a legally binding agreement between a buyer and a supplier for the purchase of goods or services. It is typically created by the procurement or purchasing department, and typically requires approval from the procurement or purchasing department before being sent to the supplier. The purpose of a Purchase Order is to confirm and finalize the purchasing process, and it is used for accounting and tracking purposes.

Conclusion

In conclusion, Purchase Requisition and Purchase Order are two important documents used in the purchasing process. Purchase Requisition is used to request the purchase of goods or services and initiate the purchasing process, while Purchase Order is used to confirm and finalize the purchase by legally binding the buyer to purchase the goods or services at the agreed upon terms and conditions. Together, these documents ensure that the purchasing process is well-organized, efficient, and compliant with the organization’s policies and procedures. It’s important that both documents are used correctly and in the appropriate sequence to ensure a smooth purchasing process and to avoid mistakes or misunderstandings.

Leave a Reply

error: Content is protected !!