What is Purchase Requisition? Meaning, Process, Format, Examples, Benefits

In the world of procurement and purchasing, understanding the foundational elements is paramount. Among these, the concept of a purchase requisition stands out as a pivotal procedure ensuring the efficient and systematic acquisition of goods or services. Let's explore the details of purchase requisition, understanding its importance, process, and various forms.

What is Purchase Requisition/Purchase Requisition Meaning

A Purchase Requisition is an internal document created by employees to request specific goods or services. Before reaching the purchasing department, it often requires the approval of the employee's line manager. It's a structured way to communicate needs, ranging from office supplies to project-related items. This organised approach aids in optimal spending management and marks a vital first step in the procurement process.

Purpose of Purchase Requisition

The primary purpose of a purchase requisition is accountability and transparency in organisational spending. Think of it as a control mechanism, a check and balance for expenditures. It ensures that purchases align with corporate objectives and budgets. This process is particularly crucial in large organisations where multiple departments may have varied requirements and budgets.

Types of Purchase Requisitions

Companies often use different types of requisitions depending on the nature and frequency of purchases. The two primary types are:

1. Standard Purchase Requisitions (SPO): This is used when a request is made for specific goods or services. The requisition details the items, their required quantities, vendor details, price per item, and other pertinent information. Upon internal approval, usually by the finance or procuring team, this requisition transforms into an actual purchase order.
2. Subcontracting Purchase Requisitions: These pertain to details about subcontracting services a company is availing from third-party entities. Once approved, these requisitions evolve into subcontracting purchase orders.
3. Stock Transfer Purchase Requisitions: As the name suggests, this type of requisition deals with the transfer of stock. It encompasses details like quantities or boxes of items being transferred, the source and destination points, and the date of transfer. To legitimise the movement of goods or stock from one location to another, these requisitions are converted into purchase orders.

Purchase Requisition Process

1. Purchase Request Submission: It all starts when an employee identifies a need. Using the company’s standardised Purchase Requisition form, the employee (often termed the 'requester') fills out the necessary details, such as the type of goods or services, quantity, and estimated cost.
2. Request Screening: Once submitted, the form reaches the purchasing agent or department. This phase is crucial for data integrity. The purchasing agent verifies the information provided and checks for any missing details. They may send it back for revisions or proceed to the next step, depending on the completeness of the form.
3. Managerial Review and Approval: The completed form only goes directly to procurement in some organisations. It usually requires administrative oversight. The immediate manager or department head reviews the requisition to ensure it aligns with budgetary constraints and operational needs. They may approve it, reject it, or request modifications.
4. Final Approval and Purchase Order Generation: If everything is in order, the requisition receives final approval, often from the finance department or senior management. Once approved, a purchase order is generated and sent to the supplier.

Purchase Requisition Form: What is a Purchase Requisition Form

The Purchase Requisition Form is the foundational document that completes the purchase requisition process. It's the template used to request the procurement of goods or services formally. The form usually includes fields for the requester's name, department, date of request, item descriptions, quantity, estimated costs, and approval signatures.

How to Create a Purchase Requisition

Creating a Purchase Requisition is a straightforward but crucial process, which can be outlined in these simple steps:

• Identify the Need: Understand why you need the item or service before anything else. Is it critical for operations, or can it wait?
• Choose the Requisition Type: Decide whether you need a standard, subcontracting or stock transfer requisition based on the purchase's nature.
• Fill Out the Form: Use your organisation’s standard Purchase Requisition Form to enter all required information accurately. Be specific about quantities, types, and estimated costs.
• Justify the Purchase: Include any justifications or supporting documents that can help during the approval process.
• Submit for Review: After completing the form, send it off for a look-over and the green light. 

Stay in the Loop: Keep tabs on how your request is doing, and be ready to chip in with more details if asked.

Purchase Requisition Template

Source: Pinterest

A Purchase Requisition template is a pre-designed form organisations use to standardise the request process. The template usually includes:

• Requester's Information
• Department
• Date of Request
• Item or Service Description
• Quantity
• Estimated Cost
• Approval Signatures
• Justification or Notes

The template may also have fields specific to the organisation's unique needs or the type of goods/services being requested. 

Purchase Requisition Example

Imagine you work in the IT department of a company, and you need five new laptops for new hires.

• Requester's Information: Rajesh Kumar, IT Department
• Department: Information Technology
• Date of Request: September 15, 2023
• Item Description: Dell Latitude 7420 Laptops
• Quantity: 5
• Estimated Cost: ₹85,000 each
• Justification: Required for new hires starting on September 30, 2023
• Approval Signatures: (Space for Manager and Finance Department)

In this example, the form spells out precisely what is needed, why, and how much it's likely to cost. Such details make evaluating the request easier for managers and finance teams.

Purchase Requisition Tcode

In the world of SAP systems, the term "Tcode" or "Transaction Code" is used to execute particular functions. The commonly used Tcode for purchase requisition is ME51N for creating a new requisition and ME52N for changing an existing one. Knowing the right Tcodes can accelerate the process, especially in larger organisations with standard SAP systems. 

Benefits of Automating Purchase Requisition Process

Automating the purchase requisition process can offer a multitude of benefits. Some of the key advantages include:

• Improved Efficiency: Automation significantly reduces the time spent generating and approving requisitions.
• Cost Savings: Automated systems can help identify the best suppliers and offer analytics that aid in budgeting and forecasting.
• Transparency: A digital trail makes tracking requests at every stage easier, improving accountability and reducing chances of fraud.
• Better Compliance: Automation helps ensure all purchases follow the set policies and procedures.

How Can Automation Improve Purchase Requisition Processes?

Automation leverages technology to simplify, streamline, and accelerate the purchase requisition. Here’s how:

• Streamlined Approvals: Automated workflows speed up requisition approvals. 
• Real-Time Tracking: Automation offers instant status updates, reducing follow-ups. 
• Data Analytics: Advanced analytics inform spending decisions. 
• Audit Trails: Automation aids in compliance and simplifies audits.