Purchase Requisition vs Purchase Order: Key Differences

Purchase requisition and purchase order are documents required for acquiring goods and services for a company. However, purchase requisition and purchase order are both different. A purchase requisition is a document requested internally to get permission to buy goods and services, and a purchase order is for actually purchasing goods.

What is a purchase requisition?

Every time an employee needs to purchase goods and services for a business,  they have to get permission from the finance department. This request for permission is a purchase requisition. The purchase can be for office supplies, inventory, items for manufacturing, etc. To do anything on behalf of the company, you need approval from an authorised person first. Purchase requisition forms create an audit trail and ensure transparency in all processes.

Why do you need a purchase requisition?

Key office bearers cannot always contact the vendor and get their supply. They need employers to contact vendors on their behalf. However, when this direct contact happens between them, there are chances of fraud. To prevent this, companies use a purchase requisition workflow. This creates an audit trail which makes the employer responsible for their actions.

Moreover, an internal document such as purchase requisition is better than word of mouth to validate an order. It adds more authenticity to the purchase.

What is a purchase order?

A purchase order serves as a contract between a buyer and seller. It will have details such as price, number of units to be delivered, date of delivery, etc. A purchase order follows the process of a purchase requisition. Once the request is approved, a purchase order will be sent to the vendor. Purchase orders are important for record-keeping for accounting purposes.

Why do you need a purchase order?

Purchase orders help companies track what they need to get delivered, details about the vendor, etc. For audit purposes, you need documents suggesting that the purchase department heads approved the order made. A purchase order is required for this. There are times when a vendor might increase their price between the time the contract was signed and the goods are delivered. You can use the purchase order as proof that the price has already been agreed upon between the parties. Purchase orders also help you have a very organised record-keeping system. They make it easier for you to track orders, ensuring you deliver goods in time.

Purchase order vs Purchase requisition

Even though purchase order vs purchase requisition has key differences, they form an integral part of business management. Both these documents help businesses to manage cost and inventory. They ensure transparency during audits and protect both the vendors and your business.