Requisition vs. Purchase Order

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Req2PO Is Your “Purchasing Department”

You know that you need to spend money in your business to make money, and employees need certain products and services to effectively carry out their job functions. What you don’t need is a line of employees at your door asking for those things – from a new chair to software to conference tuition.

In large, multi-level companies, a dedicated purchasing department would take care of these types of requests. But what can small businesses do… other than have the already busy business owner handling the role of “purchasing department”?

Start with a requisition – a document an employee can use to indicate what they need and when they need it. Make it easy for them to communicate the need (stapler, chair, software, tuition, etc.) to whoever is in charge of buying or approving the purchase, whether that’s a manager, accountant, or business owner. Along with establishing spending limits for various purchasing approvers, make the process efficient and without extra paperwork. The requisition is used internally to document the request and subsequent approval. Using a requisition system can help optimize purchasing by reducing redundancy. For example, both Joe and Tara need new chairs. Making a single purchase of two chairs rather than two purchases of one chair each allows you to capitalize on a buying discount.

After the requisition is approved, the purchase order (PO) comes into play. It may seem similar to the requisition, and in some companies, these documents look almost identical because they convey nearly identical information. However, the purchase order is the formal approval to a vendor about what is needed along with indicating authorization to make the purchase, especially for purchases that are not C.O.D. While the requisition was used internally, the PO is external. That said, the PO also creates a record of the amount of money spent and with which vendors – information that plays an important part in accurate budgeting.

Ideally, because the requisition and PO convey nearly identical information (despite their inherently different uses), the transfer of that information from the requisition to the PO should be seamless rather than inefficiently redundant. That is exactly what we’ve designed the web-based app Req2PO to do.