Purchase Requisition

What is Purchase Requisition?

Purchase Requisition is defined as the duly approved written and formal request made by the store department, head of the department, or an authorized officer to the purchase department to procure specified material, supplies or equipment, of the stated description, desired quality, and quantity, within the given period.

It is an internal document of the company, prepared when the stock level reaches reorder level. As the material is going to be used by the Company’s production department, there needs to be proper coordination between the two departments, i.e. purchase and production.

It is to be noted that – No purchases are made if the purchase requisition is not duly approved.

In general, a purchase requisition is prepared by the storekeepers for regular store items, but it can also be generated by other authorities for different purposes. So, it is received from authorized persons only like:

  1. Storekeeper: When the stock of material is below or approaching ordering level, a purchase procedure is initiated by the storekeeper.
  2. Production Planner: It is also initiated by the production planner for special material required to produce a new product.
  3. Production control department: For indentation of materials, which are required for a specific job.
  4. Plant Engineer: For the repairs and maintenance of materials, a purchase requisition is issued by the plant engineer.
  5. Head of the Department: Departmental heads also issue purchase requisition for material required for the concerned department such as stationery, etc.

It is an official request which formally authorizes the company’s purchase department to issue a purchase order to purchase material meant to fulfill the requirements of the said materials. Also to guide the company’s purchase department to forecast the demand for materials in future so as to gain purchase benefit by availing discounts and better credit terms.

It also forms a basis for the preparation of the purchase budget. Purchase requisition summarizes the actual requirement for a given period which can be compared with the purchase budget so as to determine the variances and the reasons for the same.

Purpose

The initiation of purchase takes place through purchase requisition, which is nothing but a written request made by the store’s department to the purchase department, indicating the requirement of materials and supplies. It serves two main purposes:

  • Notifies the purchasing department, about the need for materials to initiate the process of purchase by authorizing them to issue purchase order to secure material desired to fulfill the periodic requirements.
  • Initiates purchase and activates the purchase procedure.
  • Provides written documentation of materials with respect to quantity, specification, type, etc. of material to be ordered.
  • Provides reference date i.e. when the material is needed.
  • Fixes responsibility of the purchase department or personnel, who prepare the requisition for material
  • Guides the purchase department to forecast future requirements of the given material, so as to secure maximum purchase benefits, as to higher discounts and better credit terms.

Format of Purchase Requisition

The format of a purchase requisition is given hereunder:format-of-purchase-requisition

Contents

  1. Requisition Number
  2. Date of making the request
  3. Description and quantity of an item
  4. Code of the required item
  5. Catalog number
  6. Brand Name
  7. Latest Date by which item should be available
  8. Signature of the person initiating a requisition
  9. Signature of executives who approve the purchase requisition.
  10. Technical Specification (if any)

What is Purchase Requisition form?

It is an internal document of the firm which an employee uses to purchase goods and services on the firm’s behalf. For regular items the purchase requisition form is prepared by the storekeeper whereas, for special materials, the form is prepared by the departmental head. It should be made available to each person responsible for its preparation.

Three copies of the purchase requisition form are prepared wherein the original copy is sent to the company’s purchase department for initiating the purchase procedure, the second copay is retained by the request initiating or indenting department and the final copy is sent to the approver for getting approval of purchase requisition. More copies of purchase requisition can be prepared as per the need.

It answers three questions:

  • What type of material is to be purchase?
  • How much material is to be purchase?
  • When the material is to be ordered or purchased?

How purchase requisition is prepared?

To prepare this note, first of all, a complete list of materials and stores needed should be determined, which requires a periodic review so that if there are any changes to it, then that could be made.

Based on the standing order, if an item is added to the standard list, the purchase department will be responsible for arranging a fresh supply of that item before it comes to an end. And if there are any changes in the existing pattern of consumption then that should be conveyed to the company’s purchase unit so that the required action can be taken accordingly.

Further, an inventory control system needs to be implemented in order to determine the stock levels to be maintained and the quantities ordered.

Wrap Up

Purchase Requisition is generated with an aim of initiating the process of purchase as well as informing the purchase department about the need. Purchase requisition acts as a basis for the preparation of the purchase budget, by determining the extent and range of materials required. Purchase Requisition gives the details of the actual requirement of materials which can be compared with the purchase budget, so as to identify variances and the reasons for such variances.

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