What is the Purchase Requisition process?

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The very first step in the purchasing process: the creation and submission of a purchase requisition for approval. This step is the foundation of any spend management strategy, and having a defined requisition process in place sets the tone for your organization’s purchasing efficiency. However, the importance of establishing a requisition process is often underestimated, and gives rise to many questions. What is the purpose, why is it important, and what’s the best way to carry out this process?Faced with so many questions, we’ve created an article that will enable you to become an expert in the field, and give you the keys to start gaining efficiency and making savings by prioritizing and defining this underestimated, but oh so important, requisition process.

What is a purchase requisition?

First of all, what is a purchase requisition? It’s an internal document or form that an employee fills out to request approval for a purchase, on behalf of the company. How does the process work? This process can be done on paper, manually (very often by e-mail exchanges) or created and submitted electronically, using automatedpurchasing or procurementsoftware.Although they are sometimes confused with ” purchase orders “, these two documents have very different functions. A purchase requisition establishes whether there is in fact a need for the requested product or service, requires authorization and, once approved and compliant,initiates the purchase order process. An approved purchase order sent to a supplier acts as a legally binding contract for the purchase of goods and services.

Why does your company need a requisition process?

In any company, large or small, there’s a constant need for goods and services to keep business operations running smoothly. However, if you let employees and departments purchase these items without controls or processes in place, these so-called “wild purchases” can quickly accumulate, draining budgets and putting your organization in financial jeopardy. All stakeholders need to be at the heart of the process.

Not to mention that if there is no requisition process or visibility into company spending, your organization is more likely to :

  • Unnecessary expenditure
  • Uncontrolled expenditure
  • Fraud
  • Overpayment
  • Duplicate payments

A purchase requisition process frames spending and promotes accountability. It also provides a framework for requirements, and ensures a clear understanding of needs prior to purchase. Each requisition must pass through the necessary internal approval levels, which validate the purchase and assess budgetary impact, supplier selection and approval, and compliance with internal purchasing policy.When this process is automated by purchasing software, it is simplified via validation circuits that route requisitions to each approver, and each point of contact is tracked in a reliable digital audit trail.

What are the stages in the requisition process?

What information is required to complete a requisition? Although the form and process may vary from one organization to another, the basic elements remain the same.A purchase requisition should generally contain the following information:

  • Description and quantity of goods or services required
  • The selected supplier and its identifying information
  • The price of the product or service requested
  • Buyer‘sidentity and department
  • Currency, cost breakdown, quotations received and any supporting or verification documentation can also be added.

The requisition process generally follows these steps:

  • The employee completes a requisition for the goods or services required and sends it for approval.
  • The requisition passes through a validation circuit, usually starting with the employee’s direct line manager. They will have the opportunity to approve, refuse or request further verification.
  • If the requisition exceeds a financial threshold defined in the procedure, it may require additional approvals.

The requisition is subject to budgetary review and internal controls. If approval is granted, the purchase requisition can be turned into a purchase order, which can then be sent to the supplier for acceptance and order placement. Example: an IT department employee needs to purchase equipment for a new arrival. A purchase requisition can be sent for approval, which may be preceded by a request for quotation from one or more suppliers to ensure that the best offer is obtained.

The requisition may be refused or returned by the purchasing department for further verification. The purchase requisition will need to be approved by line management before a purchase order is generated. Purchasing software provides access to all supporting documents, which are centralized and stored, greatly facilitating the real-time review and approval process, while reducing risk. All these steps in the requisition process are governed by internal controls, guiding spending behavior and ensuring compliance with purchasing policies. All stakeholders are involved from the outset.

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Why automate the requisition process?

A manual or paper-based requisition process can be complex and time-consuming, with lengthy e-mail exchanges, paper trails or spreadsheet tracking on several different documents. What’s more, delays and process bottlenecks frequently occur when approvers are on leave, out of the office or in a different location. These manual inefficiencies are prone to human error, which often requires time-consuming corrective action or, if left unchecked, could increase your costs.

However your manual purchasing operation is organized, it will ultimately require time and resources that could be better allocated. Purchasing management software centralizes and streamlines purchasing processes across all departments and services, instantly connecting employees wherever they may be.Software-based requisition validation circuits bring several benefits:

  • Speed: requisitions are routed to the appropriate approvers, who are notified before validating, or not, the requirements. This avoids delays between departments, and streamlines the entire purchasing process.
  • Accessibility: staff are empowered to create, submit, review and approve requisitions instantly on any device, from any location.
  • Savings: requisitions are automatically forwarded via validation channels to superiors or different departments, who validate purchases and avoid uncontrolled spending. With an upstream competitive bidding stage to guarantee the best price, and full visibility of all spend, purchasing managers can combine multiple orders into a single order with one supplier to generate savings.
  • Purchasing compliance: an automated requisitioning system is set up to simplify and enforce compliance with internal purchasing policies.

Benefits of an automated requisition process

Although a requisition is just an automatically transmitted online form, it’s also the way to control spending from the outset.Here are some of the key benefits of automating your requisition process:

  • Guide employees to spend responsibly
  • Control unnecessary and non-compliantspending
  • Prevent fraud
  • Centralize purchasingvisibility and control
  • Enable spending transparency and improve tracking
  • Support budgetary control: with budget visibility at every stage, approvers can review the impact of expenditure before approving and committing to it.
  • Purchase from approved suppliers
  • Foster a cost-conscious spending culture by enabling all employees to be accountable for what they spend
  • Provideanalysis and reporting capabilities to identify savings opportunities
  • Facilitate bundling of purchases for greater discounts and benefits
  • Reduce operational costs

Streamline the requisition process with Weproc

Effective spend management starts with a robust requisition process. To increase efficiency and savings, consider taking the first step towards achieving your cost containment goals by deploying purchasing software that replaces manual inaccuracies with automated purchasing efficiency.Start proactively managing the way your employees buy and spend with an automated requisition process.Weproc purchasing management software helps companies in a variety of industries implement simple, mobile purchasing processes and reduce operational expenses by 20-30%.

 

Want to learn more about our procurement management software Weproc? Contact us or request your free 15-minutes demo below!

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