The payment requisition and the purchase order are two documents used in the procurement cycle of goods and services. The documents provide crucial financial documentation, which simplifies auditing. Although these documents are quite similar, each is different and used for a different function.

Here’s what we will cover:

  1. Definition of Payment Requisition and Purchase Order
  2. Difference in Usage
  3. Difference in Structure
  4. Purchase Order Fields
  5. How to Create a Purchase Order

Definition of Payment Requisition and Purchase Order

Different types of payment requisitions are used to request the purchase of items. This document is created by a requester within an organization and forwarded to the procurement department or unit. A payment requisition would typically contain information about the requester (designation included), details of requested items, and the preferred service provider’s information. Once the procurement team receives the payment requisition, the procurement officer would generate a purchase order is approved. The payment requisition is also used for financial reporting by the accounting department of the organization. A rejected payment requisition would be sent back to the requester for correction where necessary.

The procurement creates a purchase order once the requisition order is approved. Purchase orders are only issued by the authorized procurement officer of a company. Generated purchase orders are used to detail required items and forwarded to the supplier for processing. A purchase order automatically becomes a legal document between the buyer and the seller when the supplier accepts it. A typical purchase order would usually contain the buyer’s representative information, items to be supplied, shipping details, terms and conditions of the transaction, order number, and more. For uniformity and ease of processing, the purchase order and payment requisition number are usually the same.

Difference in Usage

A payment requisition is strictly used for the internal procurement processes of an organization. In no circumstance is a payment requisition used for procurement processes outside of the buyer’s organization. If the payment requisition is mistakenly used, it lacks the legal traction to develop a valid agreement between the two parties involved.

Although the payment order is generated internally within an organization, it is not used internally. Once created, it is forwarded to the supplier, and it can quickly form the bases for the creation of a valid legal agreement between the two parties.

Difference in Structure

A typical payment requisition would not require the buyer’s information, which may include the company’s name and address. Also, it would usually carry an internal company’s account information that would typically be used to make payments to the supplier. No comments or remarks field is provided within a payment requisition document.

A purchase order would usually have the buyer’s complete information. Such information includes the company name, company address, and company shipping address. Also, a purchase order would often have a field for messages or remarks, which allows the buyer to provide additional information or references to the supplier.
The procurement of goods and services can be a complicated process. Several forms of problems can occur, which can lead to delays and shipment errors. Using a purchase order can help to ease the procurement process.

Purchase Order Fields

For you to have a valid purchase order, it must have several critical fields filled with specific information. These fields are:

Buyer Information

All types of purchase orders would usually have a buyer information field. This information includes the company’s name and address. Also, the buyer would often include the purchase order number, which aids the filing of documents.

Method of Shipment

The buyer would usually want to include the preferred method of shipment. For example, if a buy prefers an express method of delivery, they would write this within the field.

Requested Goods or Services

This field carries a tabulated list that provides the code, description, quantity, unit price, and expected date of delivery of requested items.

Remarks or Comments

Within this field, the buyer usually includes specific requests about handling and other requirements.

Subtotal and Total Field

This field allows for the calculation of subtotal and total while considering taxes, handling and shipping fees, and discounts.

How to Create a Purchase Order

Specialized and general software applications can be used to generate a purchase order. The type you use may depend on availability and preference.

A useful purchase order can be generated through the following steps.

Creating a Header

Within the header, the words “purchase order” is usually written at the top. Also, companies may prefer to include the date and purchase order number within the header.

Input Buyer Information and Preferred Shipping Address

The buyer’s information and the preferred shipping address is written. The buyer’s information is usually written just below the header. In some cases, you may want to include it within the header. It is also essential to include the preferred shipping address for the buyer.

Input Vendor Information

You would also want to write the vendor information in the purchase order. Such information includes company name, contact person’s name, address, and contact details. All these are usually written at the top of the document.

Order Information

It may be preferable to input the order information in a tabular form within the main body of the purchase order document. Each item is written with its corresponding code, description, quality, unit price, and expected delivery date.

Summary of Order

The summary of the order includes subtotal, discounts, taxes, other expenses, and the total cost. These are calculated and written accordingly in the summary field.

 

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Conclusion

Payment requisition and purchase order are two crucial documents, which are commonly used in an organization to simplify the general procurement processes of a company. These two documents have some similarities and a whole lot of differences across structure and function.

 

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