What Is a Requisition Order?
What Is a Requisition Order?
A requisition order is a formal request made by staff to a departmental head in charge of finances, requesting to purchase goods and services outside an organization. Simply put, it's a document an employee within your company creates to request a purchase of goods or services.
A requisition order, supported by effective purchasing software, holds critical significance as it enables the finance department to monitor its accounts payable, reinforcing accountability and facilitating the prediction of cash flow requirements within an organization. This document delineates the department requesting the goods, the individual initiating the request, comprehensive information about the goods, the potential supplier, and their respective location.
The purchasing department never sends the requisition order to the supplier, but it assists in moving to the next level of the procurement process, which is the actual purchase of the goods.
Purchase Order vs. Requisition Order? What's the Difference?
The terms "purchase order" and "requisition order" are often used interchangeably and assumed to be the same. But they are not the same thing.
A purchase order is a legal document written by a company to a supplier requesting the supply of goods and services for the stipulated quality, quantity, place, and time. On the other hand, a requisition order is an internal document that seeks permission to buy specified goods and services of set quantity and quality within a specified time frame.
A requisition order always precedes a purchase order and must align with your company's financial goals. In most cases, a supply chain officer uses a requisition order to obtain a Pro-forma invoice which indicates the prices for the desired goods and services.
The pro-forma invoice number is always indicated on the purchase order and ensures the cost of the goods to be procured matches the amount indicated on the pro-forma invoice.
A supplier can use the purchase order to demand the payment and even set the payment terms. However, a supplier cannot use a requisition order to make demands to the company regarding goods and services yet to be supplied.
Similarly, if a company fails to pay the supplier for the goods supplied, the supplier can file a suit in a court of law using the purchase order.
Canceling the purchase order may attract some fines from the supplier's end due to the inconvenience caused. On the other hand, a purchase requisition is not binding to either party and hence cannot attract any fine from the officers involved. The purchase order terms must be well stipulated and followed before, during, and after the supply of goods and services.
