Purchase Requisition vs Purchase Order: Difference and Comparison

What is Purchase Requisition?

A purchase requisition, abbreviated as PR, is a formal request made by an individual, department, or employee within an organization to request the purchase of goods or services. This request initiates the procurement process within a company, and it serves as an internal document used to seek approval for a purchase before it is made. Purchase requisitions help organizations control spending, ensure that purchases are necessary and within budget, and maintain transparency in the procurement process.

Purchase requisitions are submitted by employees or departments that require specific goods or services. These requests can come from various departments within an organization, such as marketing, IT, operations, or any other department that needs to make a purchase.

What is a Purchase Order?

A purchase order (PO) is a legally binding document issued by a buyer or organization to a supplier or vendor. It is used to formally request the purchase of goods or services and serves as an official offer to enter into a transaction. Purchase orders are a crucial part of the procurement process and are used to outline the terms and conditions of a purchase agreement.

Once the supplier or vendor receives the purchase order and accepts its terms and conditions, a legally binding contract is formed. The purchase order helps ensure that both parties understand and agree to the terms of the transaction, which can help prevent disputes and misunderstandings. It also provides a clear record of the purchase for accounting and auditing purposes.

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Difference Between Purchase Requisition and Purchase Order

  1. A purchase requisition is a request made by an employee or department within an organization to inform the procurement department about the need for specific goods or services. It serves as an internal document to initiate the procurement process. A purchase order, on the other hand, is a formal document issued by the buyer to the supplier to confirm and authorize the purchase of the requested goods or services. It is a legally binding external document that outlines the terms of the purchase agreement.
  2. A purchase requisition is not a legally binding document; it is an internal request for procurement. A purchase order is a legally binding document that constitutes an offer from the buyer to the supplier and, when accepted, forms a contract between the two parties.
  3. Purchase requisitions require internal approval from relevant departments or supervisors within the organization before they can proceed to the purchasing department. Purchase orders are generated by the purchasing department after receiving an approved purchase requisition. The purchasing department has the authority to issue purchase orders.
  4. Purchase requisitions are created before the purchase order and are the initial step in the procurement process. Purchase orders are created after the purchase requisition has been approved and the purchasing department has evaluated vendor options and negotiated terms.
  5. A purchase requisition contains details about the items or services needed, including descriptions, quantities, and any special requirements. It may also include the reason for the request. A purchase order includes all the details found in a purchase requisition, but it goes further by specifying terms of the purchase, delivery dates, payment terms, and other contractual information. It is a more comprehensive and formal document.
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Comparison Between Purchase Requisition and Purchase Order

Parameters of ComparisonPurchase RequisitionPurchase Order
InitiatorDepartment or employeeProcurement or purchasing dept.
ResponsibilityRequests goods or servicesAuthorizes purchase transaction
Document StatusInternal documentExternal, legally binding doc.
Supplier InformationDoes not specify a supplierSpecifies the chosen supplier
Authorization LevelRequires internal approvalsIssued by procurement dept.
References
  1. https://egrove.olemiss.edu/acct_inst/99/
  2. https://www.inderscienceonline.com/doi/abs/10.1504/IJPM.2015.072390
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Chara Yadav
Chara Yadav

Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.

34 Comments

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