Purchase requisitions vs. purchase orders: What’s the difference?

You don’t have to be around a procurement department for long before you bump into purchase requisitions and purchase orders. Since (almost) everything in procurement depends on these two documents, it’s important to know what they are, what they do, and how they are different.

Although they might seem similar at first glance, these documents play distinct roles. A purchase requisition (PR) is an internal request to buy a product or service, and a purchase order (PO) is an external document to order it from a supplier. This guide will explain and clarify the differences between purchase requisitions and purchase orders to help you better understand procure-to-pay workflow. We end with some next steps you can take to begin streamlining your procurement processes right away.

Purchase requisitions start the purchase process

Purchase requisitions are internal documents employees use to request goods or services needed by the organization. It starts the procurement process by outlining the items and the reason for the purchase.

Advantages of using purchase requisitions

Purchase requisitions enable organizations to track and control spending. By formalizing the purchase request and approval process, they offer several advantages, such as:

• Purchase oversight: Ensures every purchase is aligned with company needs and within budget.
• Informed approvals: Provides approvers with the information they need to review and approve purchase requests.
• Record of purchases: Improves financial oversight by keeping a complete record of all purchase requests.
• Spending management: Helps prevent unauthorized purchases and controls spending.

Who completes purchase requisitions?

Purchase requisitions are completed by the employee or department who needs to purchase goods or services. After completing the request form, the requestor sends it to an approver for review.

Who approves purchase requisitions?

Purchase requisitions typically require approval from a supervisor, department head, or budget holder. Organizations often use tiered approval processes that require more senior approvals for high-value purchases. For example, a company may require the CFO to sign off on purchase requests over $1 million.

Once the purchase requisition is approved, the employee or approver forwards it to the purchasing department for processing.

What goes in a purchase requisition form?

A typical purchase request contains the following information:

• Description of the goods or services being purchased.
• Quantity and estimated cost.
• Reason for the purchase.
• Date needed.
• Employee or department making the request.

Types of purchase requisitions

Several types of purchase requisitions are used in procurement. Some of the common types include:

• Standard purchase requisition: The purchasing process for routine purchases that are not time-sensitive, such as replenishing inventories or purchasing office supplies.
• Recurring purchase requisition: A blanket purchasing process to avoid the need for creating a new requisition every time a recurring payment, such as a software subscription, is due. 
• Emergency purchase requisition: A streamlined purchasing process for urgent needs. This expedited process is used when immediate action is required, such as buying a wet/dry vacuum to clean up flooding caused by a burst pipe. 

Purchase orders authorize the purchase

A purchase order (PO) is an external document issued by the purchasing department to a supplier. It authorizes the purchase and specifies the goods and services being purchased, pricing, terms of delivery, and payment terms.

Advantages of purchase orders

The purchase order is a legal document that officially confirms the purchase and gives suppliers the information needed to fulfill the purchase efficiently and accurately. By establishing terms between buyers and sellers, the purchase order fulfills several essential tasks, including:

• Reduced errors and disputes: By clearly stating order details and terms, POs prevent discrepancies and misunderstandings that can lead to errors or disputes.
• Legal record: The purchase order is a formal contract that records the agreement between the buyer and seller.
• Order and delivery tracking: POs enable purchasing departments and vendors to track order and delivery status.
• Three-way matching: Organizations can verify invoices by matching POs to invoices and shipping receipts, ensuring that what is being charged matches what was ordered and delivered.

Who completes purchase orders?

The procurement or purchasing department generally creates purchase orders. The purchase order process starts with the team reviewing the requisitions, choosing vendors, negotiating pricing and terms, and issuing a PO to the vendor.

Who approves purchase orders?

In general, purchase orders are approved by the procurement or finance department before being issued. Many organizations take a tiered approach, requiring higher-level approvals for high-value POs.

What goes in a purchase order?

The contents of a purchase order can be divided into header and line item information as follows:

The header information is located at the top of the PO and includes:

• Purchase order number
• Vendor address and contact information
• Buyer information (Address, tax number)
• Shipping address
• Billing address
• Payment terms (e.g., Net 30, Net 60)
• Delivery date
• Total cost

The line items provide the order details and are usually listed below the header. Each line item includes:

• Description of goods or services ordered
• Quantity ordered
• Unit price
• Subtotal (Quantity X Unit price)
• Tax

Types of purchase orders

Purchase orders can be customized for specific procurement needs. Some common purchase order types include:

• Standard purchase order: The most common type of PO, standard purchase orders are used for one-time purchases of goods or services. 
• Blanket purchase order: Organizations use blanket POs when they anticipate needing certain goods and services over a period of time, but they don’t know their exact requirements. The blanket PO sets the prices, terms, and conditions, and total spending for the period but allows the buyer to adjust the specific quantities and delivery dates as needed. For example, blanket POs are often used for office supplies or services like cleaning or catering.
• Planned purchase order: Planned POs are used for large-scale purchases with staggered deliveries and payments over a period of time. The PO outlines the overall purchase agreement and allows the buyer to schedule deliveries and payments as needed. For example, a company building a new office building uses a planned PO for furniture deliveries, scheduling them to coincide with the completion of each office block.
• Contract purchase order: A contract PO creates a framework agreement between the buyer and seller that sets out pricing, terms, and delivery requirements for future purchases. They are generally used in long-term business relationships when a buyer has an ongoing need for a product or service. After issuing the contract PO, the buyer issues standard POs to make purchases.

How purchase requisitions and purchase orders impact procurement processing

PRs and POs are key to an efficient procurement and accounts payable workflow. They improve your organization’s overall performance, cost control, and financial health by improving spend management and ensuring accountability.

Let’s look at the ways purchase requisitions and POs fit into the procurement picture.

Facilitating efficient order management

The purchase requisition kicks off the P2P process by formally requesting goods or services, allowing for internal review and approval before the organization commits to a purchase. The PO formalizes the purchase commitment by authorizing the purchase and creating a legally binding agreement.

By formalizing key procurement processes, PRs and POs help organizations prevent unauthorized spending, negotiate better prices with suppliers, improve inventory management, and make informed purchasing decisions.

Better forecasting and budgeting

PR and PO processes provide a detailed record of past and planned expenditures. By analyzing this data, the teams can track actual spending against allocated budgets to identify overspending or allocate funds to cover potential shortfalls. The data also offers insights into spending patterns, allowing finance teams to develop more accurate forecasts of future expenditures, leading to better budgeting and resource allocation.

Enhancing invoice processing accuracy

AP teams can quickly and easily verify invoices by matching them against POs and shipping invoices. Matching helps prevent errors, duplicate invoices, and fraud, shortening the invoice lifecycle and improving accuracy. More efficient AP processing also strengthens vendor relationships by providing greater transparency and more reliable payment processing.

Improving internal controls and accounting

PRs and POs help organizations establish and maintain strong internal controls within the P2P process. They enforce a clear separation of duties by ensuring multiple individuals are involved in a transaction — preventing any single person from having complete control over a purchase. They also help create and maintain a complete P2P audit trail, enhancing transparency and ensuring the organization complies with regulatory requirements.

The bottom line

Accurate and well-managed purchase requisitions and purchase orders are the foundation of efficient and accountable procurement. By prioritizing clear documentation, organizations gain control over spending, streamline their P2P processes, and strengthen vendor relationships. This clarity also lays the groundwork for automating key processes like 3-way matching, further enhancing efficiency and accuracy down the line.

Ready to unlock the full potential of your P2P process? Let’s explore some valuable resources to deepen your knowledge and optimize your workflows.

	Purchase Requisitions (PRs)	Purchase Orders (POs)
What it does	Creates an internal request to approve a purchase	Places an order with a vendor
Who issues it	Individual employees or departments	Procurement or purchasing department
Who it’s sent to	Internal approvers (supervisors, department heads, or budget holders)	The vendor’s procurement or administrative team
What it contains	Unique requisition number Name and department of requester Creation date Description of goods or services Quantity Estimated cost Reason for purchase Date needed	Unique PO number Vendor address and contact information Buyer information (address, tax number) Shipping address Billing address Payment terms (e.g., Net 30, Net 60 Delivery date Description of goods or services ordered Quantity ordered Unit price Subtotal Tax Total cost

Next steps: Deepen your P2P knowledge

Want greater efficiency, cost savings, and control in your P2P process? These resources will help you refine your skills and maximize your impact.

What’s going on in accounts payable today?

Go behind the scenes of real-world accounts payable departments! Read AP Today: Bottlenecks, Benchmarks & Best Practices to learn what AP professionals across different industries are saying about their work.

What is purchase order automation?

Purchase order software can transform how your organization handles procurement. Get the facts in our Purchase order automation guide: How to automate PO processes.

How invoice automation works

Invoice automation demystified: what it is, what it does, and how it can improve AP processing.

What makes Stampli’s AI different?

Want to know more about how AI can transform your P2P workflows? Learn about Stampli’s unique approach to AI-powered finance operations automation.

Optimize P2P workflows with Stampli

Now that you understand the differences between purchase requisitions and purchase orders and how they contribute to an efficient procurement process, you can take steps to optimize your P2P workflow for maximum efficiency and control.

To truly transform your P2P processes, consider leveraging the power of finance operations automation. Stampli’s AI-powered P2P solutions empower finance teams to automate tasks, reduce errors, and gain visibility and control over spending.

Contact us today to learn how Stampli can simplify your procurement process and free your team to focus on strategic initiatives.