A requisition is a demand or request for a service or item, typically using a purchase requisition form or another standardized document. The requisition process ensures that all requisitions made within a business are accounted for systematically.
Key Takeaways
- A requisition is a formal request for obtaining a product or service, usually initiated by a business.
- The process typically requires standardized documents, known as requisition forms, to maintain an audit trail, though most are electronic.
- Requisitions are often used to procure additional supplies, raw materials, or working hours for better inventory control.
- Procure-to-Pay (P2P) systems automate the purchasing process, from requisition to vendor payment.
How a Requisition Works
Requisitions initiate and record specific actions, facilitating subsequent reporting needs. For example, employees in a company use a purchase requisition for additional supplies. Nowadays, digital requisition processes make tracking easier and automatically update the inventory.
A formal requisition process improves efficiency and accountability. Compared to informal methods, it provides a controlled and documented approach to managing supplies and forecasting future demand.
Note
In the medical field, doctors often fill out requisition forms for lab tests. These digital forms ensure correct tests for patients by including patient IDs and other key medical information.
Standardized Requisition Forms
Requisition forms typically include:
- Name of the person/company making the request
- Date of the request and delivery date
- Items requested
- Delivery location and contact information
- Department responsible for fulfilling the request
The forms often require the signature of the individual fulfilling the request, along with the completion date. In large corporations, these requisition processes are vital for maintaining employee productivity.
Another example occurs in finance—shareholders may requisition a company’s board to vote on proposed resolutions. Essentially, a requisition process formalizes procedures to improve efficiencies within a business.
Purchase Requisition vs. Purchase Order
A purchase requisition is an internal form for procuring goods and services, with no legal obligations. Internal purchase requisition forms are used by employees requesting supplies. These forms usually need managerial approval.
A purchase order, however, is a contractual agreement used when ordering goods/services from an external vendor. It details the items purchased, prices, payment terms, delivery dates, and any applicable special discounts for early payment.
Example of a Requisition
To understand the requisition process, consider this example. A health insurance company’s Learning and Development team needs new supplies for a training program. The team lead requests these supplies via the company’s automated requisition system.
The lead searches a product catalog and selects items for the team. Upon completing the requisition form, it is sent to management for approval. Once approved, it goes to the purchasing department for a secondary review. Errors or omissions may lead to a return for corrections. When everything is accurate, a purchase order is created and sent to the supplier.
The supplier receives the order, accepting the contract outlined in the purchase order. Once fulfilled, the supplier receives payment upon delivering the goods.
Special Considerations
Purchase-to-pay (P2P) systems streamline and automate procurement processes. Handling requisitioning, purchasing, and payment, these systems boost efficiency and accuracy in accounting and can reduce costs significantly.
The automated process starts with users selecting items from a catalog, adding them to a shopping cart, and getting managerial approvals. The process moves from purchasing to payment once completed.
What Is Requisitioned Property?
Requisitioned property refers to property taken by the government, like eminent domain. In the U.S., the Fifth Amendment requires the government to compensate the seized property’s owner at full market value.
What Is a Job Requisition?
A job requisition is a formal request to hire for a specific job. It contains job details, candidate qualifications, role specifics, and often a target salary or salary range.
What Is Requisition Reconciliation in Accounting?
Requisition reconciliation in accounting involves comparing two sets of records to ensure they are accurate, complete, and consistent. This comparison helps identify and explain discrepancies, adhering to generally accepted accounting principles (GAAP).
The Bottom Line
A requisition is a formal request for a product or service and can be submitted manually or electronically. A structured process enhances a business’s efficiency and accountability. Procure-to-pay systems automate the procurement process, further boosting accuracy and efficiency.
Related Terms: Purchase Order, Procure-to-Pay Systems, Job Requisition, Reconciliation in Accounting, Requisitioned Property.
References
- Medius. “Purchase to Pay Process Explained”.
- U.S. Department of Justice. “History of the Federal Use of Eminent Domain”.
