Purchase Requisition vs. Purchase Order: A Comprehensive Comparison

In the procurement process, understanding the distinction between a Purchase Requisition (PR) and a Purchase Order (PO) is crucial for efficient operations. Both documents play pivotal roles but serve different purposes within the procurement cycle. Here’s a comprehensive comparison to clarify their roles and help streamline your purchasing processes.

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 generated by an employee or department that identifies a need. The primary function of a PR is to inform the procurement department or purchasing team that a purchase is required. Key aspects of a Purchase Requisition include:

Purpose: To formally request the purchase of goods or services within an organization.

Origin: Created by employees or departments within the organization.

Content: Details required include item description, quantity, budget, and justification for the purchase.

Approval: Usually requires approval from a manager or department head before it proceeds to the purchasing department.

What is a Purchase Order?

A Purchase Order is a formal document issued by the purchasing department to a supplier to confirm the purchase of goods or services. It is a legally binding agreement that details the items being purchased, their quantities, and agreed prices. A PO is used to authorize the supplier to deliver the specified items or services and is crucial for maintaining accurate records and ensuring compliance. Key aspects of a Purchase Order include:

Purpose: To confirm and authorize the purchase of goods or services from a supplier.

Origin: Generated by the purchasing department or procurement team.

Content: Includes detailed information such as item descriptions, quantities, prices, delivery dates, and payment terms.

Approval: Serves as a formal commitment to the supplier and often includes terms and conditions agreed upon between the buyer and supplier. Key Differences Between Purchase Requisition and Purchase Order

Understanding the differences between a Purchase Requisition and a Purchase Order helps in streamlining procurement processes:

Function:

Purchase Requisition: Initiates the process and seeks internal approval before any purchase is made.

Purchase Order: Formalizes the purchase with the supplier and serves as a binding contract for the supply of goods or services.

Process Stage:

Purchase Requisition: Comes before the purchase order and is used internally to signal a need for procurement.

Purchase Order: Follows the approval of the purchase requisition and is used externally to place an order with a supplier.

Creation:

Purchase Requisition: Created by departments or employees who need to purchase items.

Purchase Order: Created by the purchasing or procurement department after a requisition has been approved.

Approval:

Purchase Requisition: Requires internal approval from relevant managers or budget holders.

Purchase Order: Requires approval from the procurement department and is sent to the supplier.

Legal Standing:

Purchase Requisition: Not legally binding and serves as an internal document.

Purchase Order: Legally binding and confirms the terms of purchase with the supplier.

Importance of Both Documents

Both Purchase Requisitions and Purchase Orders are integral to an efficient procurement process:

Purchase Requisition: Ensures that all internal needs are properly documented and approved before committing to a purchase, aiding in budget control and compliance.

Purchase Order: Provides a clear, legally binding agreement with suppliers, ensuring that both parties are aligned on the terms of the purchase, which helps in avoiding disputes and ensuring delivery.

Conclusion

In summary, while a Purchase Requisition and a Purchase Order are both crucial documents in the procurement process, they serve different purposes. The Purchase Requisition initiates the request for goods or services internally, while the Purchase Order formalizes the agreement with the supplier. Understanding these distinctions and how they fit into the procurement cycle is essential for effective purchasing and operational efficiency. SITES WE SUPPORT

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