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Requisition Process Simplified: Your Ultimate Guide

Barbara Cook
By Barbara Cook
Barbara Cook

Barbara Cook

Barbara is a financial writer for Tipalti and other successful B2B businesses, including SaaS and financial companies. She is a former CFO for fast-growing tech companies with Deloitte audit experience. Barbara has an MBA from The University of Texas and an active CPA license. When she’s not writing, Barbara likes to research public companies and play Pickleball, Texas Hold ‘em poker, bridge, and Mah Jongg.

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Updated October 1, 2024
Guide
PO Management
Procurement
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Ready to modernize your purchasing process and reduce your AP workload through automation? Let’s dive in.

Whether you’re part of a purchasing team, a procurement department, or an employee making a purchase, odds are you’re following some kind of outlined requisition process. There’s no one correct way to initiate a requisition process, but having a working process in place is essential to making smooth, and smart, purchases in most companies.

This post will address the importance and benefits of creating a standardized purchase requisition process, and explore ways to improve upon current practices so your large, midsize, or small business can get the right internal approvals and improve purchasing and spend control.

What is a Purchase Requisition?

When an employee wants to make a purchase, they must submit a purchase requisition (PR), or formal request to buy that good or service. This PR submission usually starts with a purchase requisition form containing a detailed description of the purchase need (also a description of the product), specific items, budget items, department, and any related agreements or information needed for relevant approvers to review. It will also include an official requisition number that will be connected to the purchase. 

Why is a Purchase Requisition Required? 

Usually, a requisition system is in place to help route the PR to the right approvers. Once the PR is approved, a purchase order form can be filled out, and an official purchase order + PO number will be issued.

What is the Process of Purchase Requisition?

The purchase requisition process should not be confused with the entire purchasing or procurement process. Purchase requisition refers to the events set in motion to request and gain approval for a purchase. What happens after the PR is approved can then be referred to as the PO process, or purchasing process from start to finish.

The Benefits of a Streamlined Purchase Requisition Process

A standardized and controlled purchase requisition process is very important and supports the procurement process as a whole. Not only does it initiate the purchasing process, but it also helps teams streamline processes, track and trace important purchasing information, and involve the right stakeholders and approvers. With the best procurement system, your business will have a PO process that will help create an audit trail and lessen the chances of fraud.

Automated procurement software can help your team implement a streamlined requisition process by ensuring manual work with human errors is nearly eliminated for all requisitions, and actions are expedited when creating and processing a purchase requisition order.

Understanding the Steps of a Purchase Requisition Process

Nailing the steps involved in the requisition stage of the purchasing process helps create the foundation required for a healthy procurement process overall. 

1. Purchase Request Submission

The employee requestor who needs to make a purchase of goods or services will submit the purchase request and include all information required to accurately assess the purchase’s need and legitimacy.

2. Review by Relevant Approver(s)

The purchase request form (PR) for requested goods or services will be sent to the authorized approvers depending on the need, department, cost, and various other factors.

3. Approval and PO Creation

Once the purchase requisition is approved, trusted suppliers can be sourced and selected. Their contact information and other relevant details can be entered into the system, with validation performed. The PR can then be turned into a purchase order that will be sent to the supplier to get fulfilled. It will usually include a specified delivery date. Supplier acceptance of a purchase order creates a legally binding contract. 

Why Purchase Requisition Processes Should Be Automated

An automated purchase requisition workflow will greatly benefit your organization’s finance team or purchasing department. Automation allows teams to handle multiple workflows, receive notifications, review multiple purchase orders and order receipts accurately, and better process critical documentation.

Automated digital forms help eliminate ad-hoc emails and messages, allowing users to better track internal documents like vendor information and external documents like payment terms. In a centralized database, teams can gather in-depth insights, make smarter business decisions, and, most importantly, control spending and generate cost savings.

Ready to future-proof your requisition process?

Automate the purchase requisition process to eliminate human error-prone manual processes, give stakeholders more visibility, and stronger control over business spend. 

NetSuite-Supported Automation

It’s easy to understand why businesses aim to deploy a purchase order (PO) process on NetSuite ERP. Doing so offers a number of benefits, including helping them achieve visibility, increase accountability, improve budget control and compliance, gain early involvement from the procurement team in purchasing activities, and reduce the friction that arises from the reliance on multiple communication channels and siloed systems. 

Unfortunately, when businesses attempt to launch a NetSuite PO process without addressing purchase requests (or requisition), many of these benefits are minimized, or they don’t happen at all. 

How Purchase Requisitions Can Complement the NetSuite PO Processes

If you’re currently running a purchase order process on NetSuite, you may have already encountered some or all of these issues:

  1. The PO is just a “rubber stamp” as requesters manage actual approval processes on emails, instant messages and Slack. 
  2. The order of things is flipped, because opening a PO on NetSuite requires having a vendor onboarded—but vendors need to be onboarded after the need is approved in a proper approval flow. 
  3. Mistakes happen often because opening a PO on NetSuite tends to be a technical task with a high likelihood of error. 

To alleviate these issues, modern organizations are adopting a requisition process alongside their NetSuite PO program. As a result, they’re achieving: 

  1. Improved, centralized collaboration involving all stakeholders, without siloed emails and spreadsheets.
  2. Transparency for requesters and approvers, including those who don’t have access to NetSuite.
  3. Smarter sourcing and vendor selection that happens at the right time in the process, and helps cut costs.

Reduction of risk and errors by keeping non-finance employees outside of NetSuite.

How a Requisition Process Complements NetSuite

When moving the approval process to the requisition stage, the result of an approved requisition is the generation of a PO in NetSuite. For many companies, this means there is no need for an additional PO approval process, keeping the PO handling to finance and procurement leaders. 

When optimizing purchase requests, it’s important to ensure that requesters can submit a new vendor request in parallel to the purchase request, since these always go hand-in-hand. This alleviates the frustration requesters often encounter when these processes take place on separate systems to which they may have limited or no access.

There are many requisition systems that can complement NetSuite on the market today. Some, like Tipalti Procurement, are purpose-built. Others are generic workflow tools that can be adjusted to support the requisition process. Whichever route you choose, make sure the requisition system is easy to use (a beautiful interface goes a long way!), lightning fast (unlike most financial systems), and well integrated, so that approved requests automatically create a purchase order in integrated NetSuite ERP.

FAQs

What is the process of purchase requisition?

The purchase requisition process is initiated when a company needs to make a purchase. The buyer submits a purchase request for a specific good or service, and once the purchase request is approved, a purchase order is sent to the selected supplier (seller) to be fulfilled.

What does requisition mean in procurement?

A requisition in procurement is an employee’s request to make a purchase. Before making a request, the need should be recognized, and suppliers should be researched. A purchase request can then be submitted and will wait to be approved by the employee’s supervisors, finance department decision-makers, or any approver already pre-defined according to company policy. Purchase requisitions over a specified dollar amount may require more than one approver.

What is a requisition example?

An example of a requisition is any submission of a formal purchase request in a purchasing system that initiates the purchasing process. An example of a requisition is a purchase request for 10 laptops. An approver will then have to decide if there is a need and a budget that allows for the purchase of 10 laptops.

Summing it Up

A purchase requisition is a request by an employee needing to purchase goods or services. The purchase order requires approval. The next step in the purchase requisition process is to create a purchase order for submission to the selected supplier. 

Tipalti Procurement (with ERP or accounting software integration) automates the purchase requisition process, including intake and approval workflows, and automatically creates and manages purchase orders sent to suppliers. Your business can also integrate Tipalti AP automation software to process and pay global supplier invoices in accounts payable to use a unified procure-to-pay system. Learn more about best practices in procurement. 

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