Question

what is a purchase requisition? what are the implications if the company does not prepare a purchase requisition and communicates the need for inventory directly to the purchase order function?

Answer 1

Purchase requisition

Purchase requisition is a document submitted by various departments of the company for requesting   the required quantity of materials for the production. The purchase requisition is a form filled by the head of the departments, when they are in need of materials, or manufacturing supplies. The form includes details of the materials required in terms of quantity and the information regarding the supplier’s .Here the departmental heads are not making purchase orders directly from the supplier instead they are requesting for the permission from the purchase department for getting the supplies. The purchase department has the power to approve or reject the request. Once the request is approved the purchase department will complete the procuring process on behalf of the departments of the company. For example the sales department needs a computer system for recording their transactions. For this sales department manager fills out the purchase requisition and submit it to the procurement department and the procurement department approaches the suppliers and they are completing procurement process on behalf of the sales department departments.

What are the implications if company does not prepare purchase requisition?

· If the departments are not submitting purchase requisition and they are directly communicating the requirement of materials to purchase order function it may affect the procurement process of the firm negatively the procurement process may be disorganized.

· The chances of fraud are high if the firm does   not use purchase requisition and allows departmental managers to place order directly to the suppliers .There are chances of ordering their personal requirements using the purchase requisition form.

· If the firm does not use purchase requisition there may be lack of a standardized process for procurement of materials. The procurement process may not be in systemized manner in the absence of the purchase requisition.

· The cost and time for the purchasing process may be higher if the firm does not use the purchase requisition and allows departments directly approach the suppliers for materials, as the purchase requisition helps to provide internal control over the purchase and thereby cost can be reduced.