Purchase requisition vs purchase order: the key difference
A purchase requisition (PR) is a request to buy something for the organisation – and that request will usually be subject to an approval process.
A purchase order (PO) is the formal document sent to the supplier, requesting goods or services at a specific price and within a specific time frame. In effect, a PO is an offer of a contract.
Put simply: the purchase requisition is the internal side of the process, and the purchase order is the supplier-facing side.
| Purchase requisition (PR) | Purchase order (PO) | |
|---|---|---|
| Purpose | Internal request to buy something | Formal offer of a contract to the supplier |
| Direction | Internal to the business | Supplier-facing |
| Raised | Before approval | After approval |
| Audience | Approvers within the organisation | The supplier or vendor |
| Legally binding? | No | Yes, once accepted by the supplier |
| Typically includes | Requestor, department, budget, coding and the approval trail | Everything on the PR, plus delivery address, buyer contact and T&Cs |
Do purchase requisitions need a separate number?
It's worth sequencing your PRs so each has a unique identity, linking the request to the person who made it and the supplier. Start with a number such as 1001 and increment from there – 1002, 1003, 1004.
Once approved, a PR can be converted to a PO. That's how it works in Zahara: on approval, the PR becomes the PO and can be sent to the supplier. Keeping the same number is often perfectly sensible, but you can generate a separate PO number if you prefer.
One reason to separate the two is if colleagues are likely to shortcut the process and ask a supplier to deliver before approval is complete. Our view: anyone doing that is in breach of your rules and should be dealt with directly. If your rules are clear and your process documented, separate numbering probably isn't necessary.
Another factor is your rejection rate. If most requests are approved – say 90% or more – a shared sequence stays tidy, with only the occasional gap where a PR was rejected. But if a large share are rejected, a shared sequence leaves big holes in your PO numbers, since rejected PRs never become orders. At that point, separate numbering makes more sense.
What should be on a purchase requisition?
The key elements of a PR are:
- A unique number to act as a reference
- Who has made the request
- Which department the requestor (originator) belongs to
- The total amount of the PR
- The line-item detail – quantity, product code, description, unit, unit price and tax
- The date the goods or services are required by
- The chosen supplier
- Any coding to be used
- Any budget information
- The approval process
- The audit trail – it's vital to have a record of who approved the request
What should be on a purchase order?
A purchase order carries much the same information as a PR, but because it's supplier-facing it also includes:
- Required-by date
- Contact details of the buyer
- Terms and conditions (or a link to the T&Cs used)
- A specific reference (if different to the PR)
- The delivery address
If you’re building one from scratch, our free purchase order template covers all of these. Once goods arrive, the supplier’s invoice can be matched back to the PO through automated invoice processing, so you only pay for what was ordered and received.
What is a purchase requisition approval process?
A PR needs to be approved before it can become a PO and the goods supplied. A typical approval process involves one or more people who review the request and decide whether the purchase can go ahead. Their decision comes down to:
- Do we need the goods requested?
- Price – is this the right price for these goods?
- Supplier – has the best supplier been selected?
- Budget – does the department or project have enough for this?
- Coding – has the buyer chosen the correct coding for the finance system?
A good process sends the approver all of that information by email, web app or mobile, so they can approve or reject with everything in front of them.
How many people should approve?
As a rule of thumb, the more expensive the item, the more people involved in sign-off. If a colleague wants £200 of office stationery they order every month, their line manager can likely approve it with a single click. If a director wants to buy a new Tesla for £130k, multiple people – up to and including the board – will want to sign off. The most important thing is transparency: if a higher authority such as investors or trustees ever scrutinises a purchase, the audit trail should be there for all to see.
When should you start using purchase requisitions?
As an organisation grows, structure and control matter more across every part of the business. Shouting "OK if I put a stationery order in?" across a small office works until several people all want to spend the company's money. Any organisation can introduce a PR system, and most know when the time has come. The telltale signs:
- The Finance Director is furious about an invoice for something they never knew was ordered.
- The CEO is livid because money's been spent on something they consider a waste.
To avoid surprises and stay in control, a PR system lets you manage costs and keep full visibility of committed spend.