Purchase Requisition vs Purchase Order: Know What the Difference Is

The global market size of procurement as a service is expected to grow to $13.58 billion in 2030. Thus, there is no doubt that the importance of procurement as a service is growing. However, several people are confused about the purchase requisition and purchase order and think it is the same.

Being in the booming industry, there should be no scope for tiny mistakes. That is the reason we have come up with the blog. In this blog, we will discuss purchase requisition, purchase order, and their roles. We will also discuss purchase requisition vs purchase order.

Before wasting any time, let’s get started with a definition of the purchase requisition.

What Is Purchase Requisition?

A purchase requisition is a purchase form requested by the company employee to the purchasing department. It is issued internally and sent to the purchasing department to buy material or goods and services from the outside vendor.

It is a request document sent to the authorized person when they want to purchase materials for business. Contractors use purchase requisitions because it streamlines the procurement process, keep proof of pending, and smoothen financial audits.

To create a purchase requisition, you will require the following information:

• Requesting department name
• Purchaser’s name and location
• Number and description of items
• Purchase amount
• Delivery date

But understanding purchase requisition information would not be enough to compare it with a purchase order, so let’s understand the role of purchase requisitions and also why is it crucial to use in the organization.

Role of Purchase Requisitions

Purchase requisition form plays a vital role in the purchase process. One of the reasons to use purchase requisitions is that the employee cannot place orders directly to the vendor.

Moreover, placing an order word of mouth or vocally does not look professional and increases the events of problems like a fraud. You can keep purchase requisition forms as a record. Later, it will be helpful for the financial or purchase department to track purchase orders and audit traits.

In the purchase requisitions process, the employee seeks thumbs up from the authorized person.

Types of purchase requisitions

Do you know there are different types of purchase requisitions? Yes, there are two types of purchase requisitions applied in the procurement process, following are the types:

Once we are clear with purchase requisitions, it is time to know more about the next step of the purchasing system and that is a purchase order.

What Is a Purchase Order?

A purchase order document is a document issued by the contractor to purchase goods and services from the vendors or suppliers. It is a follow-up process of purchase requisitions as it comes after the approval of the finance department.

Therefore, it is considered a confirmation order. While creating a purchase order, you need to assign a purchase order number so the internal and external documents can be diversified. Coming back to the process, a purchase order is a legal document.

So you will require to fill in all the details and information mentioned below:

• Vendor’s name and company detail
• Contact number and mailing address
• List and description items
• Shipping address
• Payment terms
• Invoice address and instructions

Now, let’s understand the role of the purchase orders and what can you expected in the purchase order.

Role of Purchase Orders

Once the purchase request and requisition are approved by the accounting department, the authorized person proposes the purchase to the vendor with the purchase order form.

The purchase order is crucial for the purchasing process because it helps in financial audits as evidence. Moreover, it is like a record-keeping system that helps companies to track spending, purchase activity, and details regarding the purchase and vendor.

For instance, there is a purchase transaction of materials between a contractor like you and a supplier. After a few days, the supplier is charging an extra price on materials. So, if you have a purchase order document you can show them as proof. You can clarify them with the original price.

Tip: Use an online free purchase order generator to quickly generate POs and avoid the manual work of creating invoices.

The purchase orders help to clear up miscommunication and do not let you fall into a fraud trap. The PO assists you to track and manage orders and invoices. Also, it will not allow contractors to make repetitive mistakes.

So far, you have understood the concept of the purchase requisition and purchase orders; now it is time to compare them. So, let’s see the difference between purchase requisition and purchase order and finds out which one you require the most.

Difference Between Purchase Requisition and Purchase Order

Purchase requisition and purchase order are key documents of the procurement process. But it is essential to know the difference, so there would not be any confusion in the process. So, let’s see purchase requisition vs purchase order.

And that’s a wrap on the difference between purchase requisition and purchase order.

Now, let’s dive into frequently asked questions.

Streamline purchasing process

In the end, every contractor aims to have streamlined the purchasing process. Indeed, there are plenty of challenges in the purchasing process.

But, having invoice software will help to improve the process by automating the workflow of purchasing procedure. Also, it will help in managing costs, allow you to have separate operating budgets, and optimize spending management with its automation process.

So, what you are waiting for? Start your free trial and experience the impact on your business.