A purchase order (PO) is a document that a buyer issues or sends to a seller to request the purchase of goods or services. It is often based on an approved purchase requisition and includes details such as product descriptions, quantities, prices, delivery dates, payment terms, and shipping instructions.
A purchase requisition is an internal document created by employees or departments requesting for a purchase. It usually requires approval by the employee's manager and the procurement department.
A purchase order is an external document that the buyer sends to the seller to place an order. This document is based on the approved purchase requisition.
A purchase process usually starts when an employee or department submits a purchase requisition. After direct managers have approved it, it is usually reviewed and approved by the purchasing (or procurement) department. Once approved, a purchase order is created and sent by the purchasing department to the selected supplier(s). Negotiations and several quotations can take place at this stage. Once both parties have agreed to the terms and prices, the supplier delivers the goods and services and issues an invoice, referencing the PO number. The accounting department matches the PO with goods received and invoice, then releases payment to the supplier.
Purchase requisitions and approval processes can be integrated into the system, effectively reducing manual paperwork and human error. When purchase requisitions are approved, information systems can automatically generate POs from the approved requisitions, maintain vendor catalogs and prices, and integrate with inventory and accounting. It can help track deliveries, match invoices, and reduce approval delays. Moreover, it provides a real-time view of business expenses and maintain control and visibility over procurement.
