Purchase Requisition / Purchase Indents
In the intricate world of business, efficient procurement processes can mean the difference between growth and stagnation. Among the pivotal tools aiding this efficiency is the Purchase Requisition (PR) and its also Purchase Indents. In this article, we’ll delve into the nuances of Purchase Requisitions, their benefits, and the processes involved.
What is Purchase Requisition?
At its core, a Purchase Requisition (PR) is a formal request made by an employee or department within an organization to the procurement department to acquire goods or services. It’s the initial step that sets the procurement process in motion. The PR contains essential details like the items needed, quantities, and any specific requirements.
However purchase request is an internal document and is not mandatory in purchasing process. But it may help to integrate both Finance department and purchasing department to agree on the budget.
The purchase requisition document and its approval can help to avoid fraudulent purchases as business owner knows what’s been bought now. So having a purchase requisition workflow for approval like that’s built in ACTouch ERP can help all.
Purchase requisition software or a Cloud ERP Software with a good audit trail can help finance team to manage accounts payable, financial audits etc.
What is Requisition Slip?
A Requisition Slip, often used interchangeably with Purchase Requisition, is a document that initiates the procurement process. It includes information such as the requester’s name, department, item descriptions, quantities, and any relevant notes. In few companies, you need your managers approval on Requisition Slips before its sent to Purchase Department to procure. In few cases, Requisition slip also contain the budgeted amount too.
What is Purchase Indents?
Purchase Indent is another term synonymous with Purchase Requisition. It’s essentially a formal request for the purchase of goods or services. The indent outlines the items required and often includes specifications to ensure accurate procurement.
Difference between Purchase Requisition and Purchase Order
While both Purchase Requisition and Purchase Order (PO) play vital roles in procurement, they serve distinct purposes. A Purchase Requisition is an internal request made by an employee or department to acquire goods or services. On the other hand, a Purchase Order is a binding document sent from the buyer to the supplier, confirming the purchase and outlining terms, quantities, and prices.
What is the Process to Raise a Purchase Requisition?
The process to raise a Purchase Requisition typically involves these steps:
- The requesting department creates a PR detailing the items needed.
- The PR is submitted to the procurement department for review.
- Procurement evaluates the PR, checks for budget availability, and ensures alignment with organizational goals.
- Once approved, the PR moves to the next phase of the procurement process.
Purchase Requisitions can be sent to respective Vendors automatically to generate the RFQ details and update their offer prices.
What is the PR Approval Process?
The PR (Purchase Requisition) approval process is a critical component of effective procurement management. It involves a series of steps and checks that ensure PRs are aligned with budgetary constraints, organizational goals, and purchasing policies before moving forward with procurement.
1. Submission of Purchase Requisition Slip
The process begins when a department or employee identifies a need for goods or services. Let’s consider an example:
Example: The IT department realizes the need for new laptops to replace outdated equipment and improve employee productivity.
2. Filling out the PR
The requester fills out a Purchase Requisition form, providing essential details about the items needed, quantities, specifications, and any other relevant information.
Example: The IT manager fills out the PR form, detailing the required quantity of laptops, preferred specifications, and any specific vendor preferences.
3. Review by Requester’s Supervisor
The PR is often first reviewed by the requester’s immediate supervisor or manager. They assess whether the request is justified, aligned with the department’s goals, and within budget limits.
Example: The IT manager’s supervisor reviews the PR to ensure that the requested laptops are necessary for the department’s functioning and fall within the IT budget.
4. Evaluation by Procurement Department
The PR then reaches the procurement department. Procurement professionals analyze the PR in-depth, verifying that it adheres to purchasing policies, budget availability, and contract terms.
Example: The procurement team examines the PR to confirm that the requested laptops meet the organization’s hardware standards and that the vendor preferences align with any existing agreements.
5. Budget Check
One of the crucial steps is to check the PR against the department’s available budget. If the requested items exceed the budget, it might require additional approval or adjustments.
Example: The procurement team verifies that the cost of the laptops doesn’t exceed the allocated IT budget for the quarter.
6. Approval Process
If the PR meets all necessary criteria, it moves forward for approval. Depending on the organization’s hierarchy, this approval might involve multiple levels of authority.
Example: The PR is routed to the IT director for final approval. The director ensures that the request aligns with the department’s strategic goals and budget allocation.
7. Documentation
Throughout the process, documentation is crucial. Each step, decision, and approval should be well-documented for auditing and accountability purposes.
Example: Every review, approval, and budget check is logged and recorded for future reference and audits.
8. Procurement Initiation
Once the PR is approved, the procurement team can initiate the sourcing process. This includes creating purchase orders, contacting vendors, and negotiating terms.
Example: With the PR for laptops approved, the procurement team begins reaching out to approved laptop vendors, obtaining quotes, and negotiating prices.
The PR approval process is a comprehensive journey that ensures prudent spending, adherence to organizational goals, and streamlined procurement. By following a structured path that involves thorough evaluation and multiple levels of review, organizations can optimize their purchasing decisions, maintain financial control, and enhance operational efficiency.
ACTouch Cloud ERP has 2 mechanism to approve the Purchase Requisition. You can use Workflow Approval or Make Checker Approval features to approve. These tools gives alerts to approve the document.
The Purchase Requisition process streamlines procurement, enhancing accuracy, accountability, and budget management. It’s the catalyst that transforms purchasing needs into actionable steps, ensuring that organizations acquire the right goods and services at the right time. With the power to prevent unauthorized purchases and optimize spending, the Purchase Requisition proves to be a cornerstone of effective procurement strategies.
|
