Requisition process in purchasing: Definition & steps

What if your procurement process could seamlessly integrate all your purchasing needs, eliminate inefficiencies, and provide complete visibility from request to payment? Does this sound too good to be true?

In this age of acceleration, procurement and financial leaders find themselves facing challenges with their outdated procurement processes, particularly in the requisition process. Understanding and optimizing this process can help control spending, manage requests efficiently, and ultimately transform your procurement operations.

A purchase requisition is a formal request to buy goods or services, typically used within an organization to ensure proper authorization and approvals before making a purchase.

This article will walk through the requisition process in purchasing, highlighting its importance and steps, and will demonstrate how a more integrated approach, particularly when powered by Zip’s AI-powered procurement orchestration platform, can streamline and enhance procurement efficiency.

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What is a purchase requisition?

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A purchase requisition (PR) is an internal document used by employees to request the purchase of goods or services. It is distinct from a purchase order, which is an external document sent to suppliers to place an order. 

The purchase requisition is one of the first major steps in the procurement process, helping your procurement and purchasing departments control spending and manage requests efficiently.

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What is the main purpose of a purchase requisition?

The main purpose of a purchase requisition is to ensure expenditures align with budgetary constraints and organizational priorities. By formalizing the needs assessment and approval process, requisitions maintain the integrity of the procurement process. 

Making sure every purchase has a trackable requisition number, including dollar amount and payment terms, ensures that every purchase is justified, necessary, and approved by the appropriate stakeholders—a paper trail safeguarding the organization's financial resources.

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What is a purchase requisition process? Key steps

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The purchase requisition process involves several key steps that ensure a structured and efficient flow from identifying a need to placing an order. Let's explore these steps in detail:

• Identification of Need: The process begins by identifying a business need within the organization. Whether it's office supplies, equipment, or services, recognizing the need is the first step in initiating the purchase requisition business process.
• Creation and Submission of Requisition: Once the need is identified, the requester fills out a purchase requisition form, providing detailed information about the request. This form is then submitted to the appropriate department for review and approval.
• Approval Process: The approval process involves multiple stakeholders, including department heads, the finance team, and the procurement department. This ensures that the request is validated, aligns with budgetary constraints, and adheres to procurement policies. Automated purchase requisition systems can streamline this approval workflow, reducing the time and effort required for manual reviews.
• Order Placement: After approval, the purchase requisition is converted into a purchase order, which is then sent to the supplier to initiate the order. This transition from requisition to purchase order is a key step in the purchase order process, ensuring that all necessary approvals are in place before any binding contracts are made.

Information to include in a purchase requisition

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A comprehensive purchase requisition plays an important role in getting the procurement process off on the right foot. Here’s a template that will help your accounting department maintain clarity and oversight to aid in internal approval of your request. Make sure to include:

1. Requester Details: The name, department, and contact information of the person requesting the purchase.
2. Date of Request: The date when the requisition is being made.
3. Delivery Information: Desired delivery date and location where the goods or services should be delivered.
4. Product or Service Description: A detailed description of the goods or services needed, including specifications, quantities, and any part numbers or model numbers if applicable.
5. Estimated Cost: An estimate of the cost of the goods or services requested, including the unit cost and total cost, taking into account quantities.
6. Justification or Reason for Purchase: Explanation of why these goods or services are needed, how they will be used, and the urgency of the request.
7. Budget Information: Details on the budget code or project number that the expenditure will be charged to, ensuring that the purchase aligns with the organization's budget constraints.
8. Approval Signatures: Signatures or electronic approvals from individuals with the authority to approve the expenditure, such as department heads or finance officers. This section may also include a review by the procurement department for compliance with purchasing policies.

The specific format and content of a purchase requisition can vary depending on the organization's policies, the type of goods or services being requested, and the procurement system in use. Ask your purchasing manager or purchasing officer what would be most helpful for successful procurement.

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Benefits of an effective requisition process in purchasing

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A streamlined requisition process is important for any organization aiming to improve budget management and reduce unauthorized spending. Here are some key benefits:

Establishing a formal process

The requisition process creates a formal pathway for requesting goods or services. This formality ensures that all purchases are justified, budgeted, and approved according to the company’s policies and procedures. By requiring departments or team members to submit a purchase requisition before making a purchase, organizations can maintain control over their expenditures and prevent unauthorized or unnecessary purchases.

Enhancing visibility and control

By initiating purchases with a requisition, organizations gain visibility into what is being requested, by whom, and for what purpose. This visibility allows for better control over spending, helps in budget tracking, and ensures that purchases align with organizational goals and needs. It facilitates the matching of purchase orders to requisitions and invoices, which is essential for accurate record-keeping and financial reporting.

Improving efficiency and accountability

The requisition process streamlines purchasing by standardizing the steps involved in acquiring goods or services. It sets clear guidelines on who can make requests, how those requests are reviewed and approved, and how purchases are then executed. This standardization not only increases the efficiency of the procurement process but also enhances accountability by clearly documenting the decision-making process behind each purchase.

By leveraging automation tools like Zip, organizations can significantly reduce process time and increase operational efficiency. Automation minimizes manual input, reducing the risk of errors and ensuring that all requisitions follow a consistent and efficient workflow. This also enhances the overall purchasing system by providing a clear audit trail, making it easier for the finance department and accounts payable team to track expenditures and validate payments.

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Common challenges of the purchase requisition process

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Despite its importance, the purchase requisition process can encounter several challenges:

Manual errors and delays

Manual processing of requisitions can lead to errors, delays, and inconsistencies. These issues can result in incorrect orders, missed deadlines, and frustration among employees and suppliers.

Lack of visibility

Without a centralized and automated system, it can be difficult to track the status of requisitions, approvals, and purchases. This lack of visibility can lead to miscommunications, duplicate orders, and unapproved spending.

Resistance to change

Implementing new technologies or processes can face resistance from employees who are accustomed to existing methods. Overcoming this resistance requires effective change management strategies and clear communication of the benefits of the new system.

To mitigate these challenges, organizations can adopt digital forms and automation solutions. Automation can reduce manual errors by standardizing the requisition process and providing real-time visibility into requisition statuses. Encouraging adoption of new technologies involves training, support, and demonstrating how these tools can make the procurement process more efficient and user-friendly.

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Importance of the requisition process in purchasing

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An efficient requisition process can help reduce procurement cycle times. By formalizing and standardizing the steps involved in making purchase requests, organizations can ensure that all purchases are necessary, approved, and aligned with budgetary constraints. Improve business operations by:

• Accelerating procurement cycle times: Streamlining the requisition process reduces the time taken to move from identifying a need to placing an order. These accelerations can help maintain operational efficiency and meet organizational goals.
• Ensuring compliance and control: An effective requisition process ensures that all purchases are compliant with organizational policies and budgetary constraints. This control is essential for maintaining financial health and preventing unauthorized spending.
• Enhancing financial reporting: By tracking all requisitions and approvals, organizations can maintain accurate records and facilitate financial audits. A transparent audit trail can ensure accountability in the procurement process.

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Improve the purchase requisition process with Zip

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Integrating solutions like Zip's Procurement Orchestration platform can accelerate procurement activities. 

Zip's AI-driven tools streamline the process of extracting key data from purchase orders and documents, reducing manual input and potential for errors. The platform's automated purchase requisition workflow captures essential data at the request stage, ensuring that employees can adhere to policies without friction.

Zip provides comprehensive visibility into the entire procurement process, from requisition to payment. This transparency enables better decision-making and enhances spend management, ensuring that procurement leaders have the insights they need to optimize their operations. Furthermore, Zip's seamless integration with existing systems ensures a smooth transition from traditional methods to a more optimized I2P model.

By adopting Zip's platform, organizations can streamline procurement activities, leading to better resource allocation and cost savings. 

To explore how Zip can enhance your requisition process, we invite you to request a demo and experience firsthand the benefits of an integrated and efficient procurement solution.