In the world of procurement and purchasing, understanding the difference between a purchase requisition and a purchase order is crucial for streamlining operations and ensuring efficient supply chain management. Both documents play distinct roles in the purchasing process, but they often confuse those new to procurement. This guide will clarify the differences between purchase requisitions and purchase orders, their respective purposes, and how they impact business operations.
What is a Purchase Requisition?
A purchase requisition is an internal document used within an organization to request the procurement of goods or services. It initiates the purchasing process and is typically used by employees to inform the procurement department about their needs. Key characteristics of a purchase requisition include:
Initiation: A purchase requisition is generated by an employee or department that needs to acquire items or services.
Approval Process: The requisition often requires approval from a manager or department head before proceeding. This ensures that the request aligns with the organization’s budget and needs.
Details: It includes information such as item description, quantity, estimated cost, and the reason for the purchase. It does not constitute a formal order but serves as a request.
Purpose: The primary purpose of a purchase requisition is to authorize and track the request for goods or services within the organization. It acts as a control mechanism to prevent unauthorized purchases.
What is a Purchase Order?
A purchase order (PO) is a formal document sent from a buyer to a supplier indicating the buyer’s intention to purchase goods or services. It is a legally binding agreement that outlines the specifics of the purchase. Key characteristics of a purchase order include:
Formal Agreement: A purchase order represents a formal agreement between the buyer and the supplier. It becomes a contract once accepted by the supplier.
Content: It includes detailed information such as item descriptions, quantities, agreed-upon prices, delivery terms, and payment conditions. It often includes a unique PO number for tracking.
Issuance: A purchase order is issued after a purchase requisition has been approved. It signals the official commitment to purchase and is used to confirm the terms of the transaction.
Purpose: The main purpose of a purchase order is to finalize and formalize the purchasing agreement, ensuring that both parties are clear on the terms and conditions of the transaction.
Side-by-Side Comparison
Purpose:
Purchase Requisition: Internal request for approval to purchase goods or services.
Purchase Order: Formal agreement with a supplier to deliver goods or services.
Process:
Purchase Requisition: Generated by an employee, reviewed and approved internally.
Purchase Order: Created after requisition approval, sent to supplier to confirm the purchase.
Approval:
Purchase Requisition: Requires internal approval before a PO is generated.
Purchase Order: No internal approval required; represents a formal contract with the supplier.
Legality:
Purchase Requisition: Not legally binding; serves as a request within the organization.
Purchase Order: Legally binding; represents a contractual agreement between buyer and supplier.
Tracking:
Purchase Requisition: Used for internal tracking of requests and approvals.
Purchase Order: Used for tracking the order status, delivery, and payment.
Content:
Purchase Requisition: Includes basic details and justification for the purchase.
Purchase Order: Detailed terms, prices, delivery, and payment conditions.
Coclusion
Understanding the distinction between a purchase requisition and a purchase order is essential for efficient procurement management. A purchase requisition initiates the purchasing process within an organization, requesting approval for needed items or services. In contrast, a purchase order formalizes the agreement with a supplier, detailing the terms of the purchase and ensuring that both parties are aligned. By recognizing these differences, businesses can better manage their procurement processes, ensure compliance, and enhance overall operational efficiency. SITES WE SUPPORT
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