【Logistics 101】The Importance of Purchase Requisition in Streamlining the Procurement Process

What is a Purchase Requisition Form?

A purchase requisition form is an internal document used by employees to request the purchase of goods or services on behalf of their firm. It serves as the first step in creating an effective audit trail for purchasing and is submitted to the purchasing department for approval. Once approved, a purchase order is issued to the vendor, making the purchase a legally binding contract.

Contents of a Purchase Requisition Form

A purchase requisition form typically includes the following information:

1. Name and department of the requestor
2. Date of the request
3. Products or services requested
4. Item description, quantity, and price
5. Reason for purchase
6. Legal name of the supplier

Steps Involved in the Purchase Requisition Workflow

The steps in a purchase requisition workflow may vary from one company to another. However, the basic outline of the process remains the same. Let’s explore each step in more detail:

1. Submission of Purchase Requisition Form

An employee recognizes the need for goods or services and fills out a purchase requisition form with the details of the desired purchase. This form can be filled out manually or through spend management software, depending on the company’s processes.

2. Approval from the Line Manager

The purchase requisition form is then subjected to an internal approval process, where it is verified

3. Stocktaking by Inventory Department

Next, the requisition form is routed to the inventory department, which checks it against the company’s existing stock. If the requested materials are not already in stock, the inventory department forwards the request to the purchasing department.

4. Screening by Purchasing Department

In the purchasing department, the request is processed

5. Generating a Purchase Order

If the purchase requisition form receives all necessary approvals, a purchase order is generated and sent to the vendor. Once the vendor accepts the purchase order, the purchase becomes a legally binding contract.

6. Order Delivery and Assessment

When the products or services are delivered

7. Invoice Payment

Once all documentation requirements are met, the purchase order is closed. The vendor’s invoice is approved

Benefits of Implementing Purchase Requisition in the Procurement Process

Enforcing the use of purchase requisition forms in the procurement process offers several benefits to businesses. Let’s explore these benefits in more detail:

1. Transparency in the Procurement Process

The steps involved in the purchase requisition workflow add levels of hierarchical approval, ensuring that the document is checked for accuracy and legitimacy. This workflow provides evidence of a form being issued and submitted

2. Streamlined Purchasing Process

Centralizing the purchasing process and getting employees on board with using purchase requisition forms result in a well-defined and easy-to-manage workflow. It simplifies the organization and identification of incoming products and services and streamlines inventory management. Ultimately, a centralized purchase system accelerates the purchasing process and reduces delays caused

3. Fraud Prevention

The absence of well-defined protocols leaves room for employees to engage in fraudulent acts such as ordering materials for personal use or colluding with vendors to steal from the firm. Purchase requisition forms deter fraud by ensuring that staff cannot order goods directly from vendors without following a formal process. The approval workflow and documentation trail provide transparency, making it easier to detect and prevent fraudulent activities.

4. Avoidance of Duplicate Orders

In large companies where multiple employees are involved in purchasing, purchase requisition forms help the purchasing department keep track of requests and avoid accidentally making duplicate purchases for the same order. This prevents unnecessary expenses and ensures efficient use of company resources.

5. Increased Accountability and Business Security

Purchase requisition forms serve as proof that certain materials were needed by a department and that they were ordered. Upon receiving the materials, the requisition forms create a document trail to show that the items were delivered. This record can be used as backup evidence in case of any later issues regarding the items ordered or the negotiated price. It increases accountability and strengthens the security of the business by providing a documented record of the purchasing decisions made.

6. Cost Savings

7. Proof during Audits

Purchase requisition forms play a crucial role during audits as they provide evidence of approval from managers for the company’s purchasing decisions. These forms contain all the necessary details, such as the requestor’s information, approval timestamps, and the approved materials, making them perfect evidence for audits.

Integrating FreightAmigo with Your Purchase Requisition System

Integrating FreightAmigo with your purchase requisition system allows for seamless connectivity between procurement and logistics.

While the purchase requisition form may seem like just another form to fill out, it plays an important role in streamlining the procurement process. It provides internal control over purchasing, prevents fraud, creates an audit trail, and helps make the purchasing process transparent and efficient.