What is a purchase request?

qu'est ce qu'une demande d'achats

The purchase requisition is the starting point for the entire purchasing process. So it’s very important to understand what it’s all about! Also known as the “EB” (Expression of Need), it is the first stage in an effective purchasing process. Although the requisition is very similar to an order, they are very different and each has its own specific role in the purchasing process.

Here, we’ll develop the role of the purchase requisition and take a look at the requisition process together, illustrating the difference between a purchase requisition and a purchase order. We’ll also explain why more and more organisations are deploying a proper requisition management system, and why this is arguably the most important part of the purchasing process.

So let’s get to the heart of the matter!

What is a purchase requisition?

A purchase requisition is a formal request prepared by an employee to purchase a good or service. It generally comprises a form containing a description of the purchase requirement (product description), the department and budget item concerned, the specific item (s ) requested and all the related files and agreements that the approvers need to examine in order to validate them and transform the purchase requisition into a purchase order.

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Why are purchase requisitions so important?

The procure-to-pay (P2P) process is one of the fundamental processes of any business, and it starts with the purchase requisition. As the purchase requisition is the first step in the P2P process, the quality of the whole process depends crucially on the quality of the purchase requisition.
If we take a closer look at the other areas of the buying process, it becomes clear that the requisition stage is where :

  • The largest number of stakeholders are involved: In some organisations, a large proportion of employees have the ability, or authority, to submit purchase requisitions, including requisitioners (employees), approvers (managers), the legal team, the finance and accounting department, the purchasing department, the IT department, and so on. With so many stakeholders involved, it’s vital to put in place a more efficient and streamlined process. Note that a purchase requisition process is used for both direct and indirect purchasing requirements – from tools to transport, computers, software, office supplies and more.
  • High value-added decisions are made: To buy, or not to buy? From which supplier? And which department’s budget should the cost be deducted from?
  • Genuine budget transparency: Companies that want to optimise their financial management need to start by having visibility of their spending. This meansknowing what they are going to spend and where they have room to manoeuvre. This kind of visibility can only be achieved at the requisition stage.

Streamlining the flow of requisitions also helps to improve financial management:

  • Early involvement : Unlike purchase orders, purchase requisitions can be submitted without a supplier being on the list. This means thata supplier can be assigned after the purchase requirement has already been approved. It also means that the purchasing department can get involved very early on in the requisition process and help to find the right supplier, enabling it to obtain better terms and conditions, negotiate advantageous contracts and continue to work with it over time.
  • The process of approving a purchase request often includes: those responsible for the budget who ensure that the budget is respected, the person in charge of the supplier panel who ensures that the supplier is compliant, and the legal team who ensures that an appropriate contract is in place. Another benefit of early involvement is that, even if the requester has chosen a supplier, procurement or finance always have the opportunity to change to a better supplier while the request is still awaiting approval.
  • Better budget visibility: The fact that no purchase requisition is created for approval before an order is placed limits the budgetary view. In the end, you only see the part that has been committed and paid for.
  • With a purchase requisition process, a fourth dimension is added: pending approval. This dimension is very useful, because purchase requisitions that have not yet been approved represent an opportunity for savings. This is the only part of the budget on which the purchasing and finance team can have an immediate impact, as it is not yet committed.
  • Supplier on-boarding: It should be clear by now that allowing requisitioners to submit requests is a great way to get procurement involved quickly andavoid a lot of email discussions that aren’t directly related to a requisition.

Another important feature of a proper requisition process is that requisitioners can request that a new supplier be brought on board at the same time as they submit their requisition. In this scenario, the supplier onboarding process is always triggered by the requisition. As such, it should be treated as a sub-process of the requisition, resulting in faster processing and improved tracking. An excellent requisition management tool will also offer supplier integration capabilities, giving requisitioners full visibility of their purchases, and giving finance, procurement, IT and other approvers a command centre of all ongoing processes before they enter the ERP.

Purchase requisitions also provide the organisation with full documentation and an audit trail showing who requested or approved what, when and why. This is a valuable defence mechanism against misconduct and fraud. In addition, a purchase requisition process removes the need for general corporate access to the ordering tool (often the ERP ordering module). This cleverly acts as a barrier preventing non-financial and procurement team members from entering the ERP system and generating orders.

What does the purchase requisition process involve?

The requisition process begins with a request prepared by an employee to purchase a good or service. This is usually a simple form containing all the information needed to trigger the appropriate approval process. This includes a description of the purchase requirement (product description), the department and budget involved, the specific item(s) requested and any associated files and agreements that the approvers need to review. Once submitted, the purchase requisition (PR) is routed to the appropriate approvers. This is usually done via an existing requisition system. Finally, the requisition is approved and transformed into what is known as a purchase order.

A typical requisition form contains general information as well as item information, and also allows requisitioners to attach any relevant documents or files.

Attachments to a requisition can be a quotation or agreement, a question, or any other note or file.

The information entered on the requisition form will be saved in the purchasing software. All subsequent actions on the requisition – such as approvals or questions asked – are traced in the tool, ensuring that approvers have all the context they need to make a decision and thatno stakeholder makes a mistake.

Once the request has been approved, a purchase order is issued. A purchase order is a legally binding document that is sent to the supplier. It defines the details to be taken into account when placing the order.

How do you know if you need a purchase requisition process?

You may not be sure whether your business really needs to go through a requisition process. Fortunately, there are clear signs that your company needs a requisition process using an appropriate, purpose-built solution. Here are just a few of them:

  • Budgets are becoming difficult to plan and monitor across the business.
  • Purchase requests and approvals clog up employees’ inboxes.
  • More and more stakeholders are involved in purchasing and approvals.
  • Employees are frustrated by the time it takes to get a purchase approved.
  • There is a lack of context when approving purchases.
  • Legal and security departments are involved too late in the process, which stalls it.

The purchasing department is unable to source and negotiate as it would like, resulting in lost savings opportunities. The finance department lacks visibility of expenditure tracking. Quality purchase requisitions are essential for proper purchasing processes. They make the purchasing process easier and quicker for those who need to buy, while giving more control and involvement to those who need to approve. Companies experiencing healthy growth have an increasing number of stakeholders who regularly have to approve a growing number of goods and services. To ensure the smooth running of the business, these approvals need to be fast.

Implementing a purchase requisition process also protects your organisation against malpractice and fraud by providing an easily accessible record of every purchase activity. Similarly, sensitive data and actions are inaccessible to anyone outside the finance and purchasing team.

Implementing a requisitioning process, especially one based on a dedicated requisitioning system such as Weproc, results in faster and greater employee adoption, accelerated approval cycles, improved visibility and control of the organisation’s spend, and optimised financial management.

The benefits of creating purchase requisitions

It’s important to understand that the act of placing an order always involves another process in tandem. In this context, the question to ask is: “Should this process be based on a simple email or call to the manager saying ‘I’m buying this’, or should it be more formal?”
The choice to adopt purchase requisitions aligns with the choice to treat purchasing as a serious and important process that needs to be properly monitored and managed. The benefits of purchase requisitions are fairly obvious:

  • Early involvement of key stakeholders
  • Better control and visibility over expenditure tracking
  • Reduced fraud and misconduct
  • Improved financial and budgetary planningcapabilities

All of these benefits save companies time and money.

Some elements of purchase requisitions can also be seen as barriers at the outset. For a start, rolling out any new procurement management process can make the organisation feel more cumbersome, with one more formal procedure for employees to follow. This can generally frustrate employees who don’t like change. Studies show that people generally have an aversion to change. In this context, rolling out a new process – whatever its value – can be difficult. But if the process is easy to understand and user-friendly, it will be much easier to encourage employees to adopt itfrom the outset.

When it comes to purchase requisitions, the advantages far outweigh the disadvantages. If you already have a purchasing process in place that involves emails, phone calls, spreadsheets or a generic workflow or task management system, your employees are already involved in a purchasing process. Purchase requisitions simply make this process faster, more transparent and less frustrating.

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Frequently asked questions :

What is a purchase requisition?

A purchase requisition is an internal document that an employee submits to obtain authorisation to make a purchase.

How do I submit a purchase requisition?

As a requisitioner, to make a purchase request you must complete and submit a purchase request form. This form generally indicates the product or service you wish to purchase, the quantity, the supplier, how much of the available budget it will use, etc. The requisition will then go through an approval workflow, which may contain one or more pre-assigned approvers (depending on your company’s policies).

Who approves the purchase request?

A submitted purchase requisition passes through a pre-assigned approval flow where the required approver(s) must give their approval before a purchase order can be created.

 

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