What is the name of the document used by the purchasing department that contains a description of the items required?

Convincing your employees to fill out extra paperwork when they need materials or supplies can be difficult, but putting a procurement system in place helps control costs and creates a paper trail when you're trying to audit your financial accounts. Purchase requisitions and purchase orders are key documents in the process of acquiring items your business needs to operate, standardizing the process of ordering internally and externally.

Tip

A purchase requisition is a form that an internal department of your company, such as the mailroom, submits to your company's purchasing department listing items it wants the purchasing department to order from an outside vendor. Once the purchasing department of a business has approved the purchase requisition, it issues a purchase order to the outside vendor of the requested goods, initiating the sales transaction.

Submitting a Purchase Requisition

A purchase requisition is a form that an internal department of your company, such as the mailroom, submits to your company's purchasing department listing items it wants the purchasing department to order from an outside vendor. Although individual forms vary by business, purchase requisitions generally require specific information, including the name of the department requesting the items, the exact number of items requested, a general description of the items, the legal name of the usual outside supplier and the expected price of the purchase. A purchase requisition is either approved or denied by the purchasing department.

When are Requisitions Required?

For small purchases, it is often standard procedure for internal departments to buy items directly from retailers using a company credit card and skip the process of requisitioning the purchasing department altogether. Usually, businesses require a purchase requisition when a proposed purchase exceeds a certain amount. For example, Tufts University requires a requisition order for most purchases in excess of $2,000. Other businesses require requisition orders for much smaller purchases.Purchase Orders

Issuing Purchase Orders

Once the purchasing department of a business has approved the purchase requisition, it issues a purchase order to the outside vendor of the requested goods, initiating the sales transaction. Purchase orders should include certain information, such as the name of the purchasing office, the items being purchased, the ship-to address, the payment terms, invoicing instructions and the purchase order number. To assist in record keeping, purchase orders typically have the same number as the associated purchase requisition. Once the outside vendor accepts the purchase order, it becomes a binding contract on both the buyer and seller.

Purchase Orders for Internal Transactions

A purchase requisition is an internal document sent from one department to another requesting the company buy items from an outside vendor. Typically, a purchase order is an external document going to an outside party as part of a sales transaction. However, it can also be used internally. Sometimes one department of a business wishes to purchase equipment or materials from another department; in such cases, many businesses require the purchasing department to submit an interdepartmental purchase order.

Interdepartmental purchase orders can be helpful to the financial or accounting office in large businesses where departments have separate operating budgets.

What Is a Requisition?

A requisition refers to the process of formally requesting a service or item, typically using a purchase requisition form or another standardized document. The requisition process is a standardized way of keeping track of and accounting for all requisitions made within a business.

Key Takeaways

• A requisition is a formal request for obtaining a product or service, typically initiated by a business.
• The requisition process typically requires the use of standardized documents, known as requisition forms, to maintain an audit trail along the way, although today most of these are electronic forms.
• Requisitions are often used to procure additional supplies, raw materials, or working hours to achieve better inventory control.
• Procure-to-Pay (P2P) systems fully automate the purchasing process, from requisition to vendor payment.
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How a Requisition Works

A requisition initiates the request for a specific action and also records that action for subsequent reporting needs. For example, employees within a company would use a purchase requisition if they needed additional supplies. At one time, requisitions were done via paper forms, but most companies now use digital requisition processes that enable easier tracking of the process, including an accounting of relevant inventory. These types of requisitions oftentimes automatically update the inventory for better controls.

A formalized requisition process improves efficiency and accountability across all points of contact. As opposed to employees taking whatever supplies they want when they want them, the purchase requisition provides a more controlled and documented method for managing internal supply inventories and future demand. For example, in the medical profession, doctors complete a requisition form when requesting lab tests. These digital forms include the patient ID and other medical information, assuring patients receive correct lab tests.

Standardized Requisition Forms

Requisition forms typically include the name of the person making the request, the date of the request, items requested, the delivery date, the delivery location, and the department responsible for fulfilling the request. The forms also include the signature of the individual fulfilling the request and the date completed. In large corporations with multiple locations and centralized purchasing, these requisition processes are critical in maintaining employee productivity.

Another example of a requisition process occurs within the world of finance when shareholders choose to requisition a company’s board of directors to take a vote on proposed resolutions. At its essence, a requisition process is a formalized documented procedure key to improving efficiencies within a business setting.

Purchase Requisition vs. Purchase Order

A purchase requisition is an internal form used for procuring goods and services and has no legal or binding contractual obligations. A purchase order is a contractual agreement used by companies when ordering goods and services from an external vendor. For example, a company ordering supplies from an office store will issue a purchase order detailing the items being purchased, their prices, payment terms, delivery dates, and any special discounts offered for early payment.

The internal purchase requisition form at a company is for employees who wish to request supplies for their departments or themselves. Oftentimes these forms require managerial signoff.

Example of a Requisition

To better understand the requisition process, consider the following example. The Learning and Development team of a health insurance company needs new supplies for its training program. The team lead must request these supplies through the company's automated requisition system.

The lead searches a catalog and selects an assortment of products for the team. After completing the requisition form, it is submitted to management for approval. The manager reviews, approves, and then sends the request to the purchasing department.

Like the manager, the purchasing department reviews and approves the requisition. If errors are present or if not enough information is included, the request may be returned to the manager or the requestor for updates. In this example, there are no errors or omissions; therefore, a purchase order is created for the supplier. The purchase order lists the specifics of the order, such as the product type and the quantity needed. Once final, the purchase order is sent to the supplier for fulfillment.

The supplier receives the order, and if accepted, contracts with the purchaser for the products requested. The purchase order serves as the contract. The supplier delivers the products as requested and receives payment.

Special Considerations

Purchase-to-pay systems (P2P) streamline and automate the requisition and procurement process for companies. Three main processes are cared for by these systems: requisitioning, purchasing, and payment. By automating these processes, purchase-to-pay systems increase efficiency and accuracy in accounting.

Purchase-to-pay systems can reduce costs by approximately 80%.

The automated process begins with requisitioning. Users are presented with a catalog of products or services. Items are then selected and saved in a shopping cart. The requisition is routed to management for approval, and once received, the system moves to the purchasing process and then finalized once payment is made to the vendor.

Requisition FAQs

What Is Requisitioned Property?

Requisitioned property is property taken by the government, such as with eminent domain. In the U.S., the Fifth Amendment requires the government to compensate the owner of seized property; however, the amount of consideration need not be the full market value of the property.

What Is a Job Requisition?

A job requisition is a formal request to hire someone for a job. The requisition contains the details of the job, including desired candidate qualifications, role requirements, and job details. Some companies also post the target salary or salary range in the requisition.

What Is Requisition Reconciliation in Accounting?

Requisition reconciliation in accounting is the process by which two sets of records are compared for accuracy, completeness, and consistency. The comparison will help identify and explain discrepancies. Under generally accepted accounting principles (GAAP), the required double-entry accounting method helps to pinpoint when and where errors exist.

The Bottom Line

A requisition is a formal request for a product or service. Requisitions can be submitted manually or electronically. A structured requisition process improves efficiency and accountability. Procure-to-pay systems fully automate the procurement process, from requisition to payment, which further increases accuracy and efficiency.

What are the document used in purchases?

What is the name of the document generated by the department identified in purchasing department?

What form should I use to inform the purchasing department about it?

What is the description of purchase order?