Purchase Requisition Vs Purchase Order | DocTech

In this article we explain the basics around Purchase Requisitions vs Purchase Orders for any organisation looking to implement a full Purchase Order Process, or for those struggling to control costs.

All businesses buy goods and services in some shape or form.  Adopting a standardised approach and putting rules in place not only provides an audit trail, but avoids overspend and in extreme cases, instances of fraud.

But where to start and what's the difference between a Purchase Requisition and a Purchase Order?

What's The Difference: Purchase Requisition vs Purchase Order

In any well-structured procurement process, two essential documents play key roles in ensuring purchases are properly requested, approved, and tracked: the Purchase Requisition and the Purchase Order. While they may appear similar at first glance, these documents serve very different purposes and are used at different stages of the procurement cycle.

Let’s break down the key differences, how each document works, and why both are important for effective purchasing and financial control.

What is a Purchase Requisition?

A Purchase Requisition is an internal document created by an employee or department to formally request the purchase of goods or services. This document is submitted to the finance or procurement team for review, and it must be approved before any buying activity takes place.

Key Characteristics of a Purchase Requisition:

• Internal Use Only: It never leaves the organisation.

• Initiates the Procurement Process: The requisition signals a need, but no transaction occurs at this stage.

• Approval Workflow: The request is reviewed, and depending on company policy, it may be approved, modified, or rejected.

• Tracking and Auditing: Each requisition is typically assigned a unique reference number, allowing it to be tracked and audited throughout the procurement process.

• Threshold Rules: Some organisations only require a requisition for purchases above a certain value, while others may mandate one for all purchases, regardless of amount.

A Purchase Requisition document will contain standard information such as the purchasers name, their department, description and quantity of items, name of intended supplier and the expected price.

At this stage, no order is placed with a supplier. The purpose is simply to begin the internal approval process and ensure that purchasing decisions align with budgets and policies.

What is a Purchase Order?

Once a purchase requisition has been approved, the next step is to generate a Purchase Order (PO). This is an external document that is sent to the supplier to formally place the order. It acts as a legally binding contract between the buyer (your organisation) and the seller (the supplier).

Key Characteristics of a Purchase Order:

• Sent to the Supplier: It's the official request to supply the specified goods or services.

• Legally Binding: Once accepted by the supplier, the PO becomes a contract that outlines the terms of the purchase.

• References the Requisition: Often, the PO carries the same reference number as the original requisition to maintain a clear audit trail.

A Purchase Order will consist of very similar information to the requisition document but with the addition of the purchasing company's contact details, payment terms, invoice instructions, delivery address and PO number.

Why Are Both Documents Important?

Using both a purchase requisition and a purchase order creates a clear, traceable purchasing process that helps organisations:

- Prevent unauthorised purchases

- Ensure budgetary and managerial approval

- Purchase only from approved or preferred suppliers

- Improve financial transparency and accountability

- Maintain accurate records for auditing and tax purposes

Without these documents, employees might bypass proper channels and place verbal or informal orders, which can lead to overspending, lack of oversight, and compliance issues.