Importance of Purchase Requisition in Procurement

Procurement is a multi-step process that businesses engage in to acquire goods and services with the right quality and quantity from reliable sources, at good prices, and with on-time deliveries. An organization needs to improve its purchasing process with time to meet customer demands for high quality along with quick delivery and personalized solutions at reduced costs. Ideal procurement strategies are heavily influenced by cost efficiency plus the availability of information resources to stay relevant in growing market competition. Furthermore, effective procurement involves the identification and mitigation of risk so that supply chain disruptions can be minimized that can otherwise affect sales.

Procurement requisition is the first step in the procurement process. Whenever an employee wants to purchase on behalf of the company has to fill out a form known as a purchase requisition. This document specifies the needed product or service. Several steps are involved in the purchasing requisition process, including submission of the application, obtaining necessary approvals, and tracking all purchase requests within an organization.

Staff would transfer these requisitions to appropriate personnel while informing the finance and accounts departments. The purchasing department then has to work with relevant teams for the proper fulfillment of such a request. Such kind of structured approach is very beneficial in streamlining procurement processes and propagating accountability and transparency in purchasing decisions. It is through this that organizations can effectively manage their procurement needs with little chance of mismanagement or fraud.

The Purchase Requisition Process

Following are the general steps involved in the purchasing requisition procedure:

1. Initiating a Purchase Request: The first step is to fill out the purchase requisition form. The one who starts the purchasing requisition procedure is called the requester. The requester fills out the purchase requisition form providing details of the required items or services that are needed with details of why that item is required. The form-filling process can be done manually or through e-procurement, which totally depends on the organization. Most of the time, the requester is the head of that department.  After filling out the requisition form, it is forwarded for approval by the person in charge.
2. Evaluating the Purchase Request: After approval, this form is forwarded to the purchasing department. The in charge of purchasing would assess the form by confirming the validity of the request and cross-referencing with inventory if in case the item is already present. Any errors found in the request form must be sent back to the requester, citing what changes need to be made. If found in order, it is moved forward for further approval.
3. Approving the Purchase Request: After the approval from the purchasing department, the department head and finance team review the purchase requisition to make sure that it is staying within their budget. From this review, the request may be sent back to the requester without approval. If approved, the purchase requisition is then processed and finally converted to a purchase order by the department head along with the finance team, which generally includes quantities of items needed as well as predetermined prices in negotiations prior between both parties. At that time, the purchase order is sent to the supplier, and when it gets accepted, it starts to act like a contract between the two parties. On the specified date, the requested products or services will be supplied over to the organization's inventory by their supplier. The procurement request, order, and invoice go through a cross-check where the personnel ensures that all items ordered are indeed received. Finally, the supplier is paid as per the terms and conditions agreed by both parties.

Significance of Purchase Requisition in Procurement

1. Preventing Fraud: The key purpose of purchase requisitions is to minimize the threat and incidence of fraud, called dark purchasing, where unauthorized purchases are made. This allows organizations to avoid scenarios where employees are using them for non-business reasons or they have become a victim of false invoices from vendors. It is the procedure to prevent financial wrongdoing.
2. Enhancing Communication: It keeps track of requests creating transparency regarding communication within the organization along with vendors. Purchasing is simplified and leaves no room for any uncertainty or disagreement, which helps in maintaining the procurement process and good relations with suppliers.
3. Eliminating Duplicate Orders: At times, two department heads may be demanding the same items or services. Purchase requisitions help ensure that only one person or department is authorized to approve and effect purchases. In this way, only one request is ever processed, and duplication of orders is prevented.
4. Ensuring Legitimate Purchases: An efficient purchase process eliminates the possibility of overspending or buying items that are already in stock. It helps any organization to control its expenditures and ensure that purchasing is necessary and justified.
5. Centralizing Procurement Activities: It centralizes the procurement process to ensure all requisitions are approved by one department. It improves negotiating power with the supplier, mainly for bulk purchasing and obtaining better prices and terms.
6. Establishing an Audit Trail: It is very important in finance review as it serves as a legal document and accounts for the procurement process. It gives records that may be cited during internal auditing or compliance checking to help establish the organization's financial reliability.

Purchase requisition is an integral part of procurement in any organization. By centralizing procurement activities, purchasing power is built with the suppliers, while resulting process visibility provides transparency and accountability. Formal requests for goods and services help to facilitate proper control of finances in any organization and reduce fraud. The further centralized approach eliminates duplicate orders and ensures that indeed purchases are legitimate ones promoting cost efficiency.

Procurement Resource’s advanced solutions help to streamline procurement within the organizational setting that includes supply chain intelligence, procurement analytics, and category insights. This will help you in fraud prevention, improving communications, de-duping orders, and validating authentic customers. We give data-driven insights to enable smart decision-making on savings and supplier management. Take a different look at how you optimize business spending by using Procurement Resources for ultimate procurement transformation, leading to sustainable growth!

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