Procurement 101

6 Reasons to use Purchase Requisitions

Reading time:

5 minutes

Written by

Sarah Wilson

How do you know when things are needed in your business? Emails fly around; nobody knows who is supposed to purchase what, and frustration levels rise. Manual, paper-based systems can be even more tricky, with requests getting lost and important procurement activity not happening when needed. So here are the 6 reasons to use Purchase Requisitions.

A purchase requisition process is an integral part of the procurement process and can be implemented to streamline the procurement processes in your business. It is a formal process that documents the request for purchase within an organization. 

It standardizes how your team requests purchase items and allows procurement centralization. Without it, team members can often end up contacting vendors independently, confusing the process even more with multiple contact points for your supplier. This article reviews six reasons to put a purchase requisition process in your business.

  1. Centralization of Procurement
  2. Reduce the risk of Fraud
  3. Act as a Control
  4. Prevent Miscommunication
  5. Manage Purchase Approvals
  6. Measure Performance

         DOWNLOAD THE FULL GUIDE TO SET A PURCHASE REQUISITION PROCESS

1. Centralization of Procurement

Without a formal procurement process or a team responsible, a business could potentially have multiple people contacting suppliers for the same thing. This could lead to errors, miscommunication, and potentially incorrect pricing. 

With a purchase requisition process implemented within your procure-to-pay management software, you can centralize all purchasing requests to one person or department. Purchases get done by a single point of contact within your business. They will help simplify the buying process and allow meaningful and profitable supplier relationships to form between your business and your vendors.

2. Reduce the risk of Fraud

Centralizing your procurement process has many benefits, including reducing fraud. The purchase requisition acts as evidence of a procurement request and is the single source of truth to ensure that all procurement is documented.

Keeping procurement to an individual or a single team will keep rogue purchasing at bay. This individual or group will become specialized in procurement and be able to perform the function more efficiently and effectively than in a non-centralized structure. 

Another critical area to remember when reducing fraud risk is to separate who does the buying and who pays the invoices. The separation of duties by business function is called the segregation of duties, which means that specific processes are divided by departments to reduce overall business risk.

3. Act as a Control

Purchase Requisitions are crucial to reducing errors; avoiding duplicate orders is vital, and a requisition will be where you go to confirm what was ordered and when. Standardizing the process can also help slow down purchase requests, making your team slow down and question if something is genuinely needed or could wait. The purpose of a control is not to slow down the process too much but to put an opportunity to reflect on if something is genuinely needed or can be done without.

The other way a purchase requisition can be used as a control is through the payment process. The finance team can use the purchase requisition as part of the validation process when reviewing supplier invoices and confirming what needs to be paid. Any variance found between what the supplier invoice says and what was requested can be investigated.

4. Prevent Miscommunication

The significant part of a requisition is the standardization of the request. It contains the information of who is requesting the purchase, what they require when they need it, and any other information you include in the requisition that is important to your business. Reducing back-and-forth communication will be a gold mine in terms of getting back wasted time of back and forth between team members.

Another great benefit to reducing miscommunication is minimizing the team’s stress levels. A requisition will clearly outline what is required to request procurement and will train the end user to provide all the relevant information at once. The reduction of uncertainty is key to keeping the procurement process running smoothly.

5. Manage Purchase Approvals

A purchase requisition form can be used within the approvals process if you are using a manual purchasing process. Approvals are essential to implement so you can control your spending and ensure you have visibility into the process. Having a manager sign off on a purchase requisition is a great way to implement an approval process. Approval structures can be built to customize what is needed in your business. All purchases could require approval, or simply purchase requests of a specific dollar amount, purchase category, or certain quantity requested are some examples. Finding a balance between approvals and process speed is critical.

A digital procure-to-pay management system streamlines the process between requisition and approval and makes the steps between them seamless. End users would make a purchase request within the system, and it would flow automatically through to the correct approvers instantly for review.

6. Measure Performance

Requisitions are a great starting point to measure the performance of your procurement process overall. Purchase requisitions are where you go to find out what people requested initially. Walking through the process tells you if you were able to procure the desired goods in the time frame requested.

Reviewing your purchase requisitions regularly will tell you where you may have potential issues within your procurement process. Are your suppliers able to fulfill orders? Is procurement activity occurring promptly? Are team members mindful of order frequency when requesting procurement? Can we consolidate shipments to potentially save on freight?

Essential measures, such as how much cash is tied up in inventory and the fill rate your suppliers are giving you, are just some of the ways you can measure performance in your business with purchase requisitions as the source.

Final thoughts

Purchase requisitions are the first step to start when streamlining procurement activity within your business. Between acting as controls and helping document the process, requisitions are the basis of a robust procurement process.

A purchase requisition process implemented in a procure to pay management software is an even more significant step toward fully equipping your business to leverage the procurement process. Tradogram is a cloud-based procurement platform that does a fantastic job of giving you complete visibility of your procurement.

Purchase Requisition

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