Purchasing goods is an ongoing process for any manufacturing business. As a manufacturing business, you should know about purchase requisitions (PR) and purchase orders (PO). To manage your business efficiently, you need to understand purchase requisition vs purchase order.
In this blog post, we will understand how PR is different from PO and how it works within the manufacturing business.
What Is Purchase Requisition?
A purchase requisition is a document that contains information on raw materials required for production. It is an internal document that is created by employees to request the procurement of raw materials from an outside vendor. Once the finance department or manager approves the request, the purchase order is prepared as per the request and then forwarded to the vendor.
Why Do You Need Purchase Requisitions?
Every manufacturer needs to buy goods from vendors, for which a proper paper trail is required. In such cases, the department needs to file a purchase requisition with the financial department or any assigned manager. This documentation is very important for manufacturers for the following reasons:
- They help in tax filing when proposed purchases exceed a certain amount.
- You can avoid manipulation in the process of purchasing raw materials from vendors.
- It keeps a record of every expense made by the organization and avoids surprises.
How Does Purchase Requisition Work?
Developing the purchase requisition requires several steps. It includes important information mentioned below to promote the purchasing and procurement process:
- Name of the department requested.
- Purcher’s location detail and e-mail address.
- The item description and the exact amount.
- Relevant name of the supplier or vendor.
- Vendor’s address and email ID.
- The expected price of the procurement life cycle.
- Requested delivery date.
After mentioning all these details in your PR form, it is submitted to the finance department. The assigned department cross-checks all the details through efficient audit trials to maintain transparent records. After the approval, the PO is prepared by the accounting department and sent to the assigned vendor.
What Is Purchase Order?
PO or purchase order is the next step. The PO document is prepared by the finance department and sent to the vendor when the PO number is assigned. This is an external document used to initiate the sales transaction and connect to all the parties involved in the purchasing process.
Why Do You Need Purchase Orders?
Ignoring the records can promote legal risk when any fraud happens to the manufacturing business like a breach of contract when buyers don’t receive the items on time. In such cases, on-paper records of purchase order format provide detailed information to prove your side effectively. The PO records can provide your benefits that we have mentioned below:
- Helps to avoid duplicate orders in the purchasing and procurement process.
- Helps track purchases through the assigned PO number.
- Helps companies to avoid surprise increased prices.
- Serves as evidence of PO for the managers.
- PO makes the audit trial fair and transparent.
How Do Purchase Orders Work?
In terms of understanding the difference between purchase requisition vs purchase order, PO forms have slightly different information that is sent directly to the supplier. It contains the same number as the PR number, which contains the information below:
- Your company name
- Purchase order detail
- Delivery date
- Buyer’s name
- Items to be purchased
- Payment terms
- Invoice instructions
- Purchase order number
- Address to get shipped
The finance department documents this information and sends it to the supplier during procurement management. The form is then audited by the supplier, and order fulfilment is promoted within the given deadline. After order fulfilment, the invoice is generated and sent back to the vendor.
Sometimes, the PO is also generated internally when any department wants to purchase goods from another department. Such types of purchase order management are often interdepartmental purchases that track the of resources like raw materials in the manufacturing business. These records help your finance department to keep order and invoices in check and contribute to inventory management.
Key Differences Between A Purchase Requisition And Purchase Order
Let us understand the difference between purchase order and purchase requisition more objectively. |
| Purchase Requisition | Purchase Order |
|---|---|
| A purchase requisition is a document that contains information on raw materials required for production. | The purchase order is prepared by the finance department and sent to the vendor when the PO number is assigned. |
| Employees need internal approval to make purchases. | A legally binding document that connects the buyer and the vendor based on pre-defined terms. |
| Generally created by the buyer or an employee of the specific department of the manufacturing company. | A purchase order process is carried out by the accounting team or procurement buyer. |
| Purchase requisition is approved by the manager or head of the accounting department. | The approval process is carried out by the procurement director. |
| It carries a unique PR code containing numbers. | PO code contains a sequence of alphanumeric digits. |
Role Of Purchase Requisitions And Purchase Orders In An Efficient Process
Procurement planning can be a complex procedure that requires careful monitoring of raw materials and approval of BOM (Bill Of Materials). Implementing the right strategy for the PR and PO process can play an important role in managing the purchasing and procurement process with the following benefits:
- Promotes effective inventory management and inventory control.
- Provides visibility over resources and raw materials.
- Reduces unnecessary expenses in the procurement cycle.
- Saves time in the procurement of raw materials.
- Provides legal binding between buyer and supplier.
Streamline Your Purchasing And Procurement Management Process
If you are a manufacturer or supplier, implementing purchase requisition software helps you automate your approval process. This software provides procurement solutions for SMEs who need to purchase raw materials to streamline their manufacturing process. They provide an approval module where you can easily access the pending PR and PO forms and approve them as per your needs.
The software also contains purchase requisition vs purchase order templates, which can be customized to your needs. Your employees can easily create PR and PO using simple steps and get approval from the assigned authority. All the details are recorded automatically, and you can access them anytime and anywhere you want using the internet, phone, or laptop.
Speedup Your Procurement Process With TranZact
The ideal management module helps to view approved and rejected documents on a centralized dashboard. A software system removes the need to create lengthy documents by hand. TranZact is a software that has an approval module that helps with documents. It reduces the paperwork and makes everything digital. This decreases the risk of errors and saves time.
It is made for Indian SME manufacturers. It automates bill creation for buyers and suppliers. It helps you easily share them with the organization, your supplier, and stakeholders and streamlines your procurement management process. You can access ready-to-use templates that help speed up your invoice reaction, and they can be shared through emails and WhatsApp. Choose TranZact procurement software now with easily accessible features and prevent long processes to speed up your approval process.
FAQs
1. What is the main difference between a purchase requisition and purchase order?
The main difference between a purchase requisition and a purchase order is that PR is created for internal approval, where a PO is sent to the supplier.
2. What are the 5 parts of purchase requisition?
5 parts of the purchase requisition are:
- Buyer’s information
- Vendor’s information
- Description of goods and services
- Information on requirements
- Types and quantity of goods
3. Which is the first PO or PR?
The PO comes after the PR is approved. It contains information about the vendor along with purchase details. First PR is the request from the buyer to the accounting department to get approval for the required raw material for manufacturing.
4. What are the 7 steps of the requisition form?
7 steps of the requisition form are:
- Requisition from submission.
- Form approval by the manager.
- Stock checking by the inventory management department.
- Cost analysis by purchasing department.
- Purchase order generation.
- Order procurement.
- Invoice generation.
5. What is an example of purchase requisition?
An example of a purchase requisition is when a mechanical manufacturing company needs 50 new hydraulic pumps for their assembly line. The purchase requisition includes details like model number, quantity, and estimated cost per unit, with a justification that current pumps are failing and reducing production efficiency.
6. What is the PR approval process?
The PR approval process is the manufacturing department's request to purchase goods or services. This process includes the approval of the HR (Human Resources) department or finance department.
7. What are the 2 types of requisition?
Two types of requisition are Purchase requisition and item requisition.
8. What is purchase requisition?
A purchase requisition is the first internal request that is made by the employees to fulfil raw materials or other resources.
9. What is the purchase order?
A purchase order is a document that is created by the finance department to order resources from the suppliers.
10. What are the 4 types of PO?
The 4 types of PO are:
- Standard Purchase Order (PO)
- Planned Purchased Order (PPO)
- Blanket Purchase Order (BPO)
- Contract Purchase Order (CPO)
