Ready to modernize your purchasing process and reduce your AP workload through automation? Let’s dive in.
The purchase order request, also known as purchase requisition, is the starting point of the purchasing process. After identifying a need for a specific purchase, the request is what allows things to be set in motion. Any business that works in procurement should know how to make and submit purchase order requests since this will help streamline the whole purchasing operation. While some organizations are happy to stick to simple emails, there are benefits to following a proper process for the purchase order request.
Purchase order requests and purchase orders are often mistaken for one another, most likely because smaller businesses would skip the purchase order request stage altogether. In reality, both play different roles in the purchasing process.
In this guide, we will elaborate on the differences between the purchase order request and purchase order and explain more about how purchase order requests work.
So let’s get started!
What is a Purchase Order Request?
A purchase order request, or purchase requisition (PR), is a request made by an employee within an organization to purchase goods or services. This comes in the form of a document that is passed on internally to the concerned parties, typically the employee’s manager or whoever handles the purchases, for approval.
The document contains a detailed description of the purchase requirements, including product description, budget, and related departments. Once this is approved, the PO request is converted to a purchase order sent to suppliers.
The PO request is not a legally binding document, as it is mainly used to get permission from within the company. Unlike the purchase order form, the PO request form is never given to external parties.
The primary purpose of a PO request is to ensure that all stakeholders involved in the purchasing process are on the same page regarding what is being purchased, how much is being purchased, and when it is needed.
What is a Purchase Order?
A purchase order (PO) is a legal document between a buyer and a seller. It is generated after the PO request has been approved and serves as an official offer to buy goods or services. This is an important form for record-keeping and auditing, and the seller’s invoice should match the PO for payment to be issued.
In a purchase order form, one would find key information such as the exact number of items, payment terms, delivery schedule, and a PO number to help track payment. When both parties agree to the terms in the purchase order, it becomes a binding contract.
What is the Difference Between a Purchase Order Request and a Purchase Order?
While both are documents to be filled up, the PO request and the purchase order serve different purposes. The PO request is an internal form intended to get formal approval from the buying company.
On the other hand, the purchase order is the next step after the PO request is approved. This is an external legal document issued by a business to its supplier to provide the specified goods or services.
What Does a Purchase Order Request Form Contain?
PO request forms vary per organization, but they would generally have these fields:
General Information
| Field | Example |
| Title: | Macbooks for new hires |
| Description: | Our team is growing, and we need ten new Macbook Pro 15” laptops. |
| Subsidiary: | Company, Inc. |
| Department: | R&D |
| Account Code: | Computers & Equipment |
Item Information
| Field | Example |
| Item: | Macbook Pro 15” |
| Quantity: | 10 |
| Unit Price: | $1,399 |
| Expected Date: | 06/01/2022 |
| Currency: | USD |
A good PO request form has all the key information laid out so that stakeholders will not miss any details. Sometimes, notes will be attached to the PO request form, like the item quote or a question from the employee.
After it is filled up, the form is given to approvers to check things like whether the purchase need is valid or if they have the budget to fulfill it.
Benefits of a Purchase Order Request
Many benefits come with going through the PO request stage. PO request forms help keep the purchasing process organized and streamlined, saving a lot of time and money in the long run. Additionally, they can help prevent errors by ensuring that all the necessary information is gathered before any orders are placed.
Some of the specific benefits of purchase requisitions include:
- They help ensure that the correct items are ordered.
- They can help to prevent overspending by keeping track of budgets.
- They help to streamline the purchasing process.
- They can help to improve communication between departments.
- They prompt an early involvement from key stakeholders.
Steps in Making a Purchase Order Request
Request Submission
The PO request or purchase requisition process usually starts when an authorized requisitioner creates a request for an item or service. The employee will submit a request form that includes all the necessary information.
Approver’s Review
The request is then reviewed by the selected approvers. These people will determine if the request is valid and within budget. Once approved, the PO request is forwarded to the purchasing department.
Approval and PO Creation
With the approved request, a company can then source and select suppliers. Once a supplier is chosen, the business sends over a purchase order document for the supplier’s review. When both parties agree to the purchase order terms, it becomes a binding contract. This would also serve as a basis for the seller’s invoice.
When Do You Need a Purchase Order Request Process?
Some businesses would simply send ad-hoc emails or messages to start the PO request process. But aside from them being difficult to track, such methods are also prone to human errors. Here are clear signs that your business needs a proper system for the PO request process:
- There are many stakeholders involved in the process, and it’s getting difficult to keep track of who needs to do what.
- PO requests are often made at the last minute, which causes delays in the approval process.
- Approvals take too long because the relevant parties have to be contacted one by one.
- The current system is manual and paper-based, making it error-prone and time-consuming.
- It is difficult for the finance team to track the company’s spending.
As you can see, a well-organized PO request process is crucial for businesses that want to streamline their operations and avoid unnecessary delays. It is a key first step in maintaining an organization’s healthy PO system.
Can the Purchase Order Request Process be Automated?
Small businesses would usually settle with a manual PO request process, wherein the requisitioning party fills out a paper form and submits it to the assigned approvers.
However, the PO request process can be automated. The main purpose of automating the PO request process is to speed up approvals and eliminate paper waste. Automation can also help businesses track spending and budget for future purchases.
Overall, automating the PO request process can be beneficial for businesses, but it also entails some costs. It’s important to weigh the pros and cons before making a decision.
Benefits of Automating the Purchase Order Request Process
An automation system can help streamline the PO request and eliminate errors often caused by manual processing. If your business is planning to migrate to an automated PO request process, here are the benefits you should know.
Reduced Processing Time
The main benefit of automating the PO request process is the reduction in processing time. By automating, the entire process is sped up from start to finish. This means that employees will be able to get their work done faster and move on to other tasks.
Improved Accuracy
Another benefit of automating the PO request process is increased accuracy. Automation can eliminate errors that are often made when manually entering data. This will help to ensure that the right products are ordered and received in a timely manner.
Increased Control and Visibility
With automation, you have increased control and visibility over the entire process. This means you can track every step of the process and see exactly where each requisition is in the system. This level of visibility is not possible with a manual system.
Enhanced Approvals Process
With automation, you can set up an approval workflow that will ensure that all requisitions are reviewed and approved on time. This will help improve the overall efficiency of your purchasing operation and enhance the approvals process.
Greater Compliance with Purchasing Policies
By automating the process, a business can set up the rules and restrictions that must be followed to approve a requisition. This will help ensure that all purchases are made in accordance with your company’s policies.
FAQs
What is purchase requisition?
A purchase requisition is a common term for a PO request. The process is initiated when a requisitioner submits a formal request for goods or services to the stakeholders or purchasing department. Once the purchase requisition is approved, it is turned into a purchase order sent to suppliers.
How do you write a PO request?
There’s no one-size-fits-all answer to this question since businesses have different requirements for their purchase requisitions. However, a few key elements should be included in every requisition, such as product description, quantity, price, and expected date.
What is the difference between a purchase requisition and a purchase order?
A purchase requisition, or PO request, is the first step in the purchasing process, while a purchase order is the second step. A purchase requisition is simply a request for goods or services, while a purchase order is an actual contract between the buyer and seller.
What is the purpose of a PO request?
The purpose of a PO request is to ensure that all internal parties agree to the goods or services to be ordered, the quantity, and the price. A well-made PO request can help avoid errors and mistakes in the purchasing process.
