Difference Between Purchase Requisition and Purchase Order (with Format, Content and Comparison Chart)

In a firm that undertakes manufacturing activity, the inflow and outflow of material occur at frequent intervals. As production can take place only when there is sufficient material. In this way, the need for material emerges every now and then. With the help of purchase requisition, permission to purchase the material is sought by various departments.

Further, the placement of an order for buying the material takes place on the approval of purchase requisition. It is the purchasing department that approves the requisition. For this purpose, the purchasing department prepares purchase order to procure goods and get them in stores timely

Purchase Process

The purchase process begins with initiating the process of purchase using purchase requisition.
After that, the company sends invites to suppliers to the submit tender. Of all the tenders received, the firm chooses one that fulfills all the conditions. And in this way the selection of supplier takes place.
Next, the purchasing department prepares purchase orders on the basis of requisition. Then the purchasing department sends PO to the supplier,
Thereafter, the receipt of material takes place. It is followed by inspection and testing.
If there is any rejected material, the department issues a debit note to the supplier.
In the end, checking and passing of purchase invoices for payment takes place.

After taking a peep into the entire purchase process. We will move towards the difference between purchase requisition and purchase order.

Content: Purchase Requisition Vs Purchase Order

Comparison Chart
What is Purchase Requisition?
What is Purchase Order?
Key Differences
Contents
Conclusion

Comparison Chart

Basis for Comparison	Purchase Requisition	Purchase Order
Meaning	A purchase requisition implies a written request for purchase created by the department in need of materials.	A purchase order is a confirmation of an order prepared by the purchasing department authorizing the supplier to supply material at given terms and price.
Type of document	Internal	External
Generated by whom?	Authorized employee of the department which requires goods.	Purchase Department
How many copies are prepared?	Three copies	Five Copies
When it is sent?	When there is a need for material and supplies.	When there is a need for order placement for the required material and supplies.
Received by whom?	Purchase department	Vendor

What is Purchase Requisition

Purchase Requisition initiates the purchase of material. It is a formal request that the departmental heads make to the firm’s purchase manager. It is used to notify the purchasing department that there is a need for materials.

This initiates the purchase process. Also, it is used to fix responsibility for the purchase request. Purchase Requisition can also be used for future reference.

Who initiates purchase requisition?

Persons who can make purchase requisition include:

Storekeeper: Storekeepers prepare purchase requisitions for routine store items. This happens when the items approach the minimum stock level or replacement of the stock of materials and parts in stores is required.
Production Planning Department: For new production development.
Plant engineer: For material needed for special maintenance and capital assets.
Department heads: For any material needed for his department. It may include filling almirah, furniture, stationery, files, etc.
Production Department: For specific items whose usage and storage are not common.
Purchase Control Department: For purchasing specialized materials.

Purpose of Purchase Requisition

It kicks start the purchase process.
Bears written evidence of details of the materials to be ordered.
Contains reference dates.

Format of Purchase Requisition

What is Material Requisition Note?

A Material Requisition Note is a formal document that is used to authorize and issue materials for use. The production department of the company is responsible for preparing it. The storekeeper issues material only on the presentation of this document. It acts as an instruction to the company’s stores department to issue materials. The department creates this note in three copies for:

Stores department
Costing department
Department which created that note.

Also Read: Difference Between Reorder Level and Reorder Quantity

What is Purchase Order?

After the approval of the requisition, and selection of the supplier to whom the order is to be given, a purchase order is prepared. It is a form that the purchasing department uses to authorize the supplier to supply the materials mentioned at agreed terms and price. PO should state the material required and the price in a clear manner.

It authorizes the supplier to deliver goods and send the bill.
Purchase Order carries a serial number. Therefore, it helps in implementing control over the issue of the purchase order.
It requires follow-up, for checking the timely delivery of the order.

Points to Note

For regular purchases, an order is placed by way of established sources of supply. Whereas for other purchases the purchasing department asks for bids. Also, it invites quotations before placing the order.
A purchase order is a legal contract between the purchaser and supplier. Therefore, it is binding in nature, so it has to be prepared with great care. And due to this reason, the authority to sign purchase orders rests in the hands of a few selected responsible officers only.
Copies of the order generated go to different departments including:
- Accounting department
- Receiving department
- Finance department

Purpose of Purchase Order

Acts as proof of contract between the parties concerned.
Allows a supplier to supply specified material.
Authorizes receiving department to receive materials ordered.
Authorizes accounts department to accept the invoices.

Format of Purchase Order

Also Read: Difference Between Purchase Order and Sales Order

Key Differences Between Purchase Requisition and Purchase Order

A purchase requisition is a formal request to the purchasing department to procure materials. Stores department prepares purchase requisition when the stock level of material approaches reorder level. But, a purchase order is a written request made to the supplier, to provide specified materials. It is to confirm the supply terms quoted by the supplier.
Purchase Requisition is an internal document, used for inter or intra departmental permission to purchase material. As against, a purchase order is an external document. This document is formal as well as binding in nature. Therefore, binds the procurement company and the vendor of the goods.
An authorized person who is the employee of the concerned department prepares purchase requisition. Whereas the purchasing department of the company prepares purchase orders.
The firm prepares five copies of the purchase order. The firm sends the original copy to the supplier. The duplicates are sent to the department including – receiving department, cost accounting department, the department that required materials. And the purchasing department retains the last copy. On the other hand, a purchase requisition is made in trio. Of which two copies are made customarily. One is sent to the purchasing department. And the stores retain the last copy to keep a check on the orders placed.
The department sends purchase requisition when there is a requirement for material and supplies. But, the company issues purchase order when there is a need to place an order for the material and supplies
The purchase manager receives the purchase requisition. Whereas the vendor receives the purchase order.

Contents of Purchase Requisition

The purchase requisition is printed in advance. Also, these are as per the specifications of the manufacturing firm. General the requisition form covers the following:

Serial number
Name of department or individual who makes a request
Quantity of items requested
Catalog number
Item description
Unit price
Total price, shipping charges
Handling cost
Insurance and related cost
Total cost of requisition
Order date
Delivery date
Authorized signature

Contents of Purchase Order

Preprinted name, address, email, and phone number of the firm placing order.
Purchase order number
Name and address of the supplier
Order date
Delivery date requested
Terms of payment and delivery
Quantity of items ordered
Catalog number
Description of items
Unit and total price
Shipping charges
Handling cost
Insurance and related cost
Total cost of the entire order
Authorized signature

Conclusion

Above all, both purchase requisition and purchase orders are an important part of the purchase procedure. In the absence of these two, the purchase can neither be initiated nor confirmed.