Purchase Requisition

A purchase requisition is an internal document that an employee submits to request approval to purchase goods or services. It is created before the supplier is engaged and before a purchase order is raised, making it the earliest control in the procure-to-pay cycle. The requisition gives management visibility into what is being proposed to be purchased and by whom, allowing the decision to be reviewed and approved internally before any commitment is made to an external party.

The distinction between a purchase requisition and a purchase order is important. A purchase requisition is internal: it goes from the requestor to an approving manager within the business. A purchase order is external: it goes from the business to the supplier and constitutes a formal commitment to buy. The requisition triggers the internal approval; the purchase order communicates the approved commitment to the supplier.

Why purchase requisitions matter

The primary function of a purchase requisition is to prevent unauthorised spending commitments. When an employee can place an order with a supplier without any internal approval, the first point of control in the AP process is the invoice, which arrives after the commitment has already been made and the goods or services may already have been delivered. At that point, refusing to pay causes a supplier dispute and potential legal liability. The requisition moves the control upstream, to before the commitment is made.

For budget management, purchase requisitions allow managers to check available budget before approving a commitment. If the marketing department has AU$50,000 remaining in its annual budget and an employee submits a requisition for a AU$60,000 agency fee, the approval process surfaces this before the order is placed rather than after the invoice arrives. This is considerably less disruptive.

Purchase requisitions in Australian businesses

Purchase requisitions are most commonly used in larger businesses with formal procurement processes and multiple budget holders. In small Australian businesses with fewer than 20 employees, informal verbal approval from the business owner often substitutes for a formal requisition process. This works at small scale but creates problems as the business grows and the owner can no longer maintain visibility over every purchasing decision.

The inflection point where informal requisition processes become inadequate is usually when the business has multiple people authorised to place orders and when the business owner is no longer involved in day-to-day operational decisions. At this point, without a formal requisition process, the first time management sees a purchasing commitment is when the invoice arrives, which is too late to prevent an overspend or an unauthorised purchase.

Connecting requisitions to purchase orders

In an integrated P2P workflow, the approved purchase requisition automatically generates a purchase order, pre-populated with the details from the requisition. This eliminates double handling: the information entered at requisition stage does not need to be re-entered when the PO is raised. It also creates a direct link between the internal approval and the external commitment, so that when the invoice arrives, the matching process can trace the transaction back to the original approved requisition.

For Australian businesses implementing AP automation, setting up a requisition-to-PO workflow is often one of the later improvements, after basic invoice capture and approval workflows are running. It is most valuable in businesses with significant discretionary spending or in environments where budget overruns are a recurring problem rather than an occasional one.