What is a Purchase Requisition and Why It Is Important for Your Business?

We have written many articles on purchase order management, but one key term that continues to cause confusion and mixup is purchase requisitions.

In this blog post, we highlight the differences between purchase requisitions and purchase orders, and why purchase requisitions are imperative in your organization.

What is purchase requisition?

A purchase requisition is a formal request initiated within an organization to procure specific goods or services. It typically outlines the description, quantity, and price of the items or services requested and serves as an internal authorization before a purchase order is issued to suppliers.

The importance of a purchase requisition in for an organization

In any organization, there is always the need for supplies or materials and equipment. These may be office supplies, consumables, machines, and other equipment. A purchase requisition not only offers a structured approach to procurement but also aids in financial management, planning, and risk mitigation, making it an indispensable tool for modern businesses.

A purchase requisition holds significant importance for a company for several reasons:

1. Financial Control: A purchase requisition system ensures that purchases align with a company’s budgetary constraints. By necessitating approval before any purchase, companies can monitor and control spending, ensuring resources are used judiciously.
2. Streamlined Procurement Process: A standardized purchase requisition process helps in consolidating requests, which can lead to bulk purchasing and potential volume discounts. It also ensures that the procurement team follows a structured approach, reducing ad hoc or unplanned purchases.
3. Enhanced Accountability: Purchase requisitions provide an audit trail. Every request, approval, or denial is documented, ensuring transparency in procurement activities. This level of documentation can be vital during internal audits or external regulatory checks.
4. Avoidance of Unauthorized Purchases: The purchase requisition process acts as a gatekeeping mechanism, ensuring only approved and necessary purchases are made. This prevents unauthorized or redundant purchases that can strain a company’s finances.
5. Forecasting & Planning: By analyzing purchase requisitions, companies can predict future spending trends, helping the finance and procurement departments in budgeting and forecasting exercises.
6. Ensuring Need Fulfillment: purchase requisitions ensure that departments get what they genuinely need to function effectively. They help prioritize and communicate demands between departments and the procurement team, ensuring timely acquisition of essential items or services.
7. Vendor Management: With a top purchase requisition system in place, procurement teams can better plan their interactions with vendors, negotiate more effectively, and manage lead times, contributing to a more efficient supply chain.
8. Risk Management: By maintaining a standardized requisition process, companies can more easily adhere to compliance standards, reducing risks related to non-compliance with internal policies or external regulations.

Purchase requisitions are the control point in the procure-to-pay cycle, keeping purchases visible, justified, and aligned with company strategy.

Why purchase requisitions are important in the procurement process

1. They initiate the purchasing process

A purchase requisition is the starting point of the procure-to-pay process. Employees or departments identify a need, complete a requisition form with details like description, quantity, and estimated cost, and submit it for approval. Once reviewed, the requisition is converted into a purchase order and sent to the supplier.

2. They act as an internal control tool

Purchase requisitions introduce structure, oversight, and transparency. With approval workflows, separation of duties, and budget checks, requisitions ensure that:

• Purchases align with budgets.

• Requests go through proper authorization channels.

• An audit trail documents every decision.

• Modern requisition systems also integrate with ERP or accounting tools for real-time budget visibility and compliance monitoring.

3. They protect against fraud and errors

By requiring approvals, justifications, and supplier validation, requisitions reduce the risk of unauthorized or fraudulent purchases. A digital purchase requisition system strengthens this protection with automated approval chains, vendor onboarding verification, and data analytics to flag anomalies.

4. They centralize and streamline procurement

Requisitions create a central hub for purchase requests, ensuring all activity flows through procurement. This centralization enables:

• Bulk purchasing and better supplier negotiations.

• Consistent documentation and audit readiness.

• Consolidated data for spend analysis and forecasting.

• Stronger compliance with company policies and regulations.

Purchase requisition vs purchase order: what is the difference?

Both purchase requisitions and purchase orders are integral components of the procurement process, but they serve different purposes and are used at different stages. Here’s a breakdown of the differences between the two:

Definition:

Purchase Requisition (PR): A purchase requisition is an internal document used by a department or individual within an organization to request the acquisition of goods or services. It is essentially a formal request that signifies a need but is not a confirmed order.
Purchase Order: A PO is an official document sent from the buyer (organization) to the seller (supplier) indicating types, quantities, and agreed prices for products or services. It’s a binding contract that commits the organization to buy the specified goods or services.

Usage:

PR: Used internally to seek approval for a purchase.
PO: Used externally to place an official order with a supplier.

Purpose:

PR: To communicate the need for goods or services and obtain necessary approvals.
PO: To officially order goods or services once the need is approved.

Audience:

PR: Typically reviewed by internal parties like managers, department heads, or the procurement team.
PO: Sent to external parties, namely the vendors or suppliers.

Binding Nature:

PR: It is not a legally binding document. It’s more of a communication tool within the organization.
PO: It is a contractual agreement between the buyer and seller. Once accepted by the supplier, it becomes a legally binding contract.

Sequence in Procurement:

PR: Comes first in the procurement process. It’s the initial step where a need is identified and approval is sought.
PO: Follows the purchase requisition. Once the requisition is approved, a PO is generated to formalize the purchase with the supplier.

Details Included:

PR: May include item descriptions, quantities, desired delivery dates, and justifications for the purchase.
PO: Contains more detailed specifications, agreed-upon prices, payment terms, delivery schedules, and other contractual terms.

Outcome:

PR: Results in either approval or denial of the requested purchase.
PO: Triggers the supplier’s fulfillment process, leading to the delivery of goods or services, followed by invoicing and payment.

What exactly is a purchase order?

A purchase order is an official document issued by a buyer to a seller, indicating the types, quantities, and agreed prices for products or services. It serves as a contractual agreement between both parties, detailing the specifics of a purchase, including delivery terms and payment conditions. Once accepted by the seller, a PO becomes a legally binding contract, committing the buyer to the acquisition and the seller to the delivery of the specified goods or services.

Purchase requisitions: The foundation of effective spend management

A purchase requisition is more than just an internal form — it’s a critical control document in the purchase requisition process. By standardizing how employees request goods and services, requisitions ensure that every purchase is authorized, budget-aligned, and backed by the right documentation before a purchase order is ever issued.

When managed through a modern purchase requisition system, these requests become a central source of truth for your procurement team. This centralization delivers:

• Stronger spend control by preventing unauthorized or duplicate purchases
• Better budget visibility with approvals tied to department or project limits
• Improved compliance and audit readiness through clear, trackable approval trails
• More informed decision-making by analyzing requisition data to forecast future needs
• Stronger supplier management by aligning requests with approved vendors

Ultimately, purchase requisitions protect your organization from unnecessary risk and give finance and procurement teams the oversight they need to make smarter, faster, and more strategic decisions.

Want to know if your requisition process is setting you up for success — or holding you back? Try the Procurement Maturity Assessment to benchmark your approach and uncover the next steps to stronger spend management.