Whether you’re part of a purchasing team, a procurement department, or an employee making a purchase, odds are you’re following some kind of outlined requisition process. There’s no one correct way to initiate a requisition process, but having a working process in place is essential to making smooth, and smart, purchases in most companies.
This post will address the importance and benefits of creating a standardized purchase requisition process, and explore ways to improve upon current practices so your large or small business can get the right internal approval, and better control over purchasing and spending.
What is a Purchase Requisition?
When an employee wants to make a purchase, they must submit a purchase requisition (PR), or formal request to buy that good or service. This PR submission usually starts with a purchase requisition form containing a detailed description of the purchase need (also a description of the product), specific items, budget item, department, and any related agreements or information needed for relevant approvers to review. It will also include an official requisition number that will be connected to the purchase. Why is a purchase requisition required? Usually a requisition system is in place to help route the PR to the right approvers. Once the PR is approved, a purchase order form can be filled out and an official purchase order + PO number will be issued.
What is the Process of Purchase Requisition?
The purchase requisition process should not be confused with the entire purchasing or procurement process. Purchase requisition refers to the events set in motion to request and gain approval for a purchase. What happens after the PR is approved can then be referred to as the PO process, or purchasing process from start to finish.
The Benefits of a Streamlined Purchase Requisition Process
A standardized and controlled purchase requisition process carries a lot of importance and supports the procurement process as a whole. Not only does it initiate the purchasing process, it helps teams track and trace important purchasing information, involve the right stakeholders and approvers, and establish a PO process that will help create an audit trial and lessen the chances of fraud.
Procurement software can help your team implement a streamlined requisition process by ensuring manual work human error are nearly eliminated and actions are expedited.
Understanding the Steps of a Purchase Requisition Process
Nailing the steps involved in the requisition stage of the purchasing process help create the foundation required for a healthy procurement process overall.
1. Purchase Request Submission
The employee who needs to make a purchase will submit the aforementioned purchase request and include all information required to accurately asses the purchase’s need and legitimacy.
2. Review by Relevant Approver(s)
The PR will be sent to the selected approvers depending on the need, department, cost, and various other factors.
3. Approval and PO Creation
Once the purchase requisition is approved, trusted suppliers can be sourced and selected. The PR can then be turned into a purchase order that will be sent to the supplier to get fulfilled. It will usually include a specified delivery date.
Why Purchase Requisition Processes Should Be Automated
Your organization’s finance team or purchasing department will benefit greatly from an automated purchase requisition workflow. Automation allows teams to handle multiple workflows, receive and review multiple purchase orders, order receipts accurately, and better process critical documentation.
Automated digital forms help do away with ad-hoc emails and messages, allowing users to better track both internal documents like vendor information and external document like payment terms. In a centralized database, teams can gather in-depth insights, make smarter business decisions, and most importantly control spending and cost savings.
It’s easily understood why businesses aim to deploy a purchase order (PO) process on NetSuite. Doing so offers a number of benefits, including helping them achieve visibility, increase accountability, improve budget control and compliance, gain early involvement from the procurement team in purchasing activities, and reduce the friction that arises from the reliance on multiple communication channels and siloed systems.
Unfortunately, when businesses attempt to launch a NetSuite PO process without addressing purchase requests (or requisition), many of these benefits are minimized, or they don’t happen at all.
How Purchase Requisitions Can Complement the NetSuite PO Processes
If you’re currently running a purchase order process on NetSuite, you may have already encountered some or all of these issues:
- The PO is just a “rubber stamp” as requesters manage actual approval processes on emails, instant messages and Slack.
- The order of things is flipped, because opening a PO on NetSuite requires having a vendor onboarded—but vendors need to be onboarded after the need is approved in a proper approval flow.
- Mistakes happen often because opening a PO on NetSuite tends to be a technical task with a high likelihood of error.
To alleviate these issues, modern organizations are adopting a requisition process alongside their NetSuite PO program. As a result, they’re achieving:
- Improved, centralized collaboration involving all stakeholders, without siloed emails and spreadsheets.
- Transparency for requesters and approvers, including those who don’t have access to NetSuite.
- Smarter sourcing and vendor selection that happens at the right time in the process, and helps cut costs.
Reduction of risk and errors by keeping non-finance employees outside of NetSuite.
How a Requisition Process Complements NetSuite
When moving the approval process to the requisition stage, the result of an approved requisition is the generation of a PO in NetSuite. For many companies, this means there is no need for an additional PO approval process, keeping the PO handling to finance and procurement leaders.
When optimizing purchase requests, it’s important to ensure that requesters can submit a new vendor request in parallel to the purchase request, since these always go hand-in-hand. This alleviates the frustration requesters often encounter when these processes take place on separate systems to which they may have limited or no access.
There are many requisition systems that can complement NetSuite on the market today. Some, like Approve.com, are purpose built. Others are generic workflow tools that can be adjusted to support the requisition process. Whichever route you choose, make sure the requisition system is easy to use (a beautiful interface goes a long way!), lightning fast (unlike most financial systems) and well integrated, so that approved requests automatically generate a purchase order in NetSuite.
The purchase requisition process is initiated when a company needs to make a purchase. The buyer will submit a purchase request for a specific good or service and once the purchase request is approved, a purchase order is sent to the selected supplier (seller) to be fulfilled.
Requisition in procurement is a request by an employee to make a purchase. Before making a request, the need should be recognized and suppliers should be researched. A purchase request can then be submitted and will wait to be approved by the employee’s supervisors, financial decision makers, or any approver already pre-defined according to company policy.
An example of a requisition is any submission of a formal purchase request that initiates the purchasing process. An example of a requisition is a purchase request for 10 laptops. An approver will then have to decide if there is a need and a budget that allows for the purchase of 10 laptops.