Purchase Requisition vs Purchase Order - Tipalti

A purchase requisition is a form submitted by an employee to their company's finance department to request permission to purchase external goods or services. SkiptoprimarynavigationSkiptomaincontentSkiptoprimarysidebarSkiptofooter WhatisTheDifferenceBetweenaPurchaseRequisition&aPurchaseOrder?We'vepairedthisarticlewithacomprehensiveguidetoaccountspayable.GetyourcopyoftheAccountsPayableSurvivalGuide!GettheFREEguide Home/AccountsPayableHub/PurchaseRequisitionvsPurchaseOrder Standardizingtheprocessoforderingwithinanorganizationrequiresdocumentation.Puttingaprocurementsysteminplacecontrolscostsandcreatesapapertrailforeasierauditing.Obtainingapurchaseordervspurchaserequisitionarebothkeyprocessesinacquiringitemsabusinessneedstosurvive.Everybuyingpolicyandprocedureisdifferent,soit’simportanttofirstunderstandthesetwosystemsandhowtheycanstreamlineyouroperations.  PurchaseRequsitionvs.PurchaseOrder:WhatistheDifference? Themaindifferencebetweenapurchaserequisitionandapurchaseorderisthatapurchaserequisitionisforgettinginternalpermissiontobuygoodsorservices,whereasapurchaseorderisforactuallypurchasingthegoodsorservices.Thesedocumentsarecreatedandapprovedinternallywithinacompany. Purchaserequisitionsaremoreinterdepartmentalformsthatallowlargerorganizationstohandletheiraccountingandfinancesbetter.Thebiggerthebusiness,themoretheneedforaprocurementprocess.Yousimplycannottracktheflowwithoutputtingitonpaper. WhatisaPurchaseRequisition? Apurchaserequisitionisaformsubmittedbyanemployeetotheircompany’sfinancedepartmenttorequestpermissiontopurchaseexternalgoodsorservices.Whenapurchaserequisitionhasbeenapproved,theactualpurchasingofgoodsorservicescannowhappenwiththeuseofapurchaseorder. Thepurchasingrequestformsaredocumentsdevelopedbythepurchaserandsubmittedtothefinancedepartment.It’sameansofgettingpermissiontostarttheprocurementprocesswithanoutsidevendor.You’rewaitingforthe“thumbsup”tobuygoodsorservicesneededtocompleteajob.  Youcan’tgocrazywithcompanycash.Youneedanapprovalprocessforvalidationpurposes.Thisservesasthefirststepincreatinganefficientaudittrailwithtransparentrecords.ItshowstheIRSyoucareaboutkeepingtrackofbusinessfinances. Thepurchasingdepartmentwillonlylookatapurchaserequisitionformoveracertaindollaramount.Everycompanydiffers,buttheaveragecostisanything$5000andover.Eachrequisitionorderrequirescertaininformation.Thiscanvarybyindustryandneedbutarequisitiontypicallyrequiresdatalike: NameofthedepartmentrequestingPurchaser’slocationandmailingaddressExactamountofitemsDescriptionofitemsLegalnameoftheoutsidesupplierExpectedpriceofpurchaseRequesteddeliverydate Themoreinformationtheaccountingdepartmenthas,themoreitfacilitatesthepurchasingprocess.Agoodpurchaserequisitionexamplewouldbewhenanemployeeneedsequipmentorongoingservicesfortheirjob. Transformthewayyourfinanceteamworks. Bringscaleandefficiencytoyourbusinesswithfully-automated,end-to-endpayables. Readmore WhyDoYouNeedaPurchaseRequisition? Whenaproposedpurchaseexceedsacertainamount,youwanttodocumentthatfortaxpurposes.Everyorganizationneedstobuythings,butwithoutapapertrail,thelikelihoodoffraudvastlyincreases.Abusinessmustmaintainsomeformofcontrolovertheirpocketbook.Topreventthis,aprocurementdepartmentservesanimportantroleinthesupplychain.Theyareasecondsetofeyesonthemoneygoingout.Thisisanessentialstrategyforsmallbusinesseswhereeverypennycounts.  WhatisaPurchaseOrder? Thisisthenextstepinapurchasingsystem.Oncearequisitionisapproved,itisassignedapurchaseordernumberandsenttothevendor.Thisexternaldocumentinitiatesthesalestransactionandisabindingcontractforallpartiesinvolved.Thepurchaseordersystemisdesignedfororganizedrecordkeeping.ThePOnumberthatisassignedgenerallymatchestherequisitionnumber,andtheyarefiledtogether.Justlikeapurchaserequisition,aPOrequirescertaininformation,like: •Nameofthepurchasingoffice •Itemstobepurchased •Paymentterms •Invoicinginstructions •Shiptoaddress •Purchaseordernumber Purchaseordersserveaskeydocumentsintheentireaccountingsystemandexpediterecordkeeping.Theyhelpcompaniesproperlyprepareforaudits.Youdon’twanttobescramblinglast-minuteforareceiptfrom10-monthsago.Efficientprocessessaveabusinessmoney. Purchaseorderscanalsoberequestedforinternaltransactions.Thishappenswhenonedepartmentinabusinesswishestopurchasegoodsorservicesfromanother.Inthiscase,aninterdepartmentalpurchaseorderisrequiredtotracktheexchangeofgoodsandservices.Thiscanbeparticularlyhelpfulforlargerbusinessesthathavedepartmentswithseparateoperatingbudgets.  WhyDoYouNeedaPurchaseOrder? Abusinessshouldneverbesatisfiedwithaverbalcommitment.Thereisagreatamountoflegalriskinvolved.Purchaseordersputthingsonpaper.Whennewpostsaremade,theyhelptoavoidduplicateorders.Thisisparticularlyimportantasyourbusinessscalesup.ItwillbehardertotrackpurchaseswithoutanassignednumberlikeaPO.   Certainfinancialauditsalsorequireyouturninpurchaseorders.Thisservesasevidenceamanagerhasapprovedapurchasingdecision.It’squickerandmoreefficientthandiggingthroughadrawerofreceipts.Italsokeepsyoufromlosingtrackoffundsorcomplicatingaccountingpractices. Purchaseorderscanhelpacompanyavoidsurprisepriceincreases.Ifasupplierchangesitscostbetweenthedateoforderandthedateofdeliveryorinvoice,aPOwillclarifytheoriginalprice.ThevendormustholdtothecontractsinceaPOisalegaldocument.Thisclearsupanypotentialformiscommunicationormisappropriatedfunds.  The POprocess willalsokeepyourordersandinvoicesincheck.Itmakesiteasytoidentifywhichproductsarecominginatanytimeandaidsinventorymanagement.Ifyouhaverepeatorders,ithelpstosortinvoicingdowntheroad. TheFutureofPurchasing Alloftheseexchangesanddocumentsseemlikebusywork.Especiallyconsideringthecapabilitiesofmoderne-procurementtechnology.Purchaseordersoftwarecanautomateandoverseetheentireprocess.Thismeansnomorewaitingforasignatureonsomeone’sdesk.Whenthepurchasingprocessisdigitized,noballsaredropped.Permissionscanbecomealmostinstantaneousandresourcesexpedited.Peoplecanfocusmoreondrivingbusinessandlessonmenialtasks. An electronicprocurementsystem integrateseasilywithotherfinancialplatforms.Abusinessthatutilizessophisticateddigitalprocessesratherthanrelyingonexceloremailcanenjoyasignificantreductionincost,greatercontroloverspend,andastreamlinedpurchasingprocess.Automationisthefutureofpurchasing. AbouttheAuthor BriannaBlaney BriannaBlaneybeganhercareerinBostonasafintechwriterforamajorcorporation.ShelaterprogressedtodigitalmediamarketingwithvariousfinanceplatformsinSanFrancisco. Shepridesherselfonreverse-engineeringthelogisticsofsuccessfulcontentmanagementstrategiesandimplementingtechniquesthatarecenteredaroundpeople(notcampaigns). Inhersparetime,she’saself-proclaimedchef,livesinthemiddleofthewoods,andhasafrequentflyercardforbirdseedanddogbones. 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