Standard Operating Procedure: Purchase Requisition (PR) Management

Introduction

The Purchase Requisition (PR) process is the foundational step in the Procure-to-Pay (P2P) cycle. Its primary purpose is to ensure that all company expenditures are authorized, budgeted, and aligned with organizational needs before a formal Purchase Order (PO) is issued. This SOP establishes a standardized framework for employees to request goods or services, ensuring accountability, financial control, and accurate record-keeping. By following these protocols, the organization mitigates the risk of unauthorized spending, maintains accurate inventory tracking, and optimizes vendor relationships.

Phase 1: Initiation and Documentation

• Identify Need: Determine the requirement for goods or services and verify that the item is not available in existing inventory or through current preferred vendors.
• Consult Budget: Review departmental budget allocation to ensure sufficient funds are available for the requested item.
• Gather Specifications: Compile detailed descriptions, including part numbers, quantities, technical specifications, and requested delivery dates.
• Obtain Quotes: Secure at least three competitive quotes from vetted vendors if the expenditure exceeds the defined "Request for Quote" (RFQ) threshold.
• Draft PR Form: Complete the digital Purchase Requisition form, ensuring all mandatory fields (GL code, project code, vendor details) are populated.

Phase 2: Internal Review and Approval Workflow

• Managerial Review: Submit the PR to the immediate department supervisor for initial validation of business necessity.
• Budgetary Controller Check: Route the PR to the Finance Department to verify budget availability and GL code accuracy.
• Executive Approval: If the PR total exceeds the departmental spending threshold, route for secondary sign-off from the relevant Director or VP.
• System Validation: Once approved, the PR must be officially converted into a Purchase Order (PO) by the Procurement department before any commitment is made to the vendor.

Phase 3: Post-Approval Execution

• PO Issuance: The Procurement team issues a formal Purchase Order to the vendor based on the approved PR details.
• Communication: Confirm with the requester that the PO has been dispatched to the vendor.
• Record Retention: Archive the approved PR, supporting documentation, and the subsequent PO in the centralized ERP/Document Management system.

Pro Tips & Pitfalls

• Pro Tip: Lead Time Planning: Always factor in vendor lead times and internal approval workflows. A "rush" requisition often leads to premium shipping fees and bypasses standard vendor vetting.
• Pro Tip: Standardization: Utilize a digital template with drop-down menus for GL codes to reduce manual entry errors and speed up financial reporting.
• Pitfall: "After-the-Fact" Requests: Never allow employees to purchase items using personal funds with the expectation of reimbursement unless pre-approved. This circumvents tax compliance and vendor payment terms.
• Pitfall: Scope Creep: Ensure the PR includes a "Not to Exceed" price. If a vendor quote changes by more than 10%, a new PR or an amendment should be required.

Frequently Asked Questions (FAQ)

1. What happens if an item is needed urgently, but the approval chain is unavailable? Emergency purchases must be documented retroactively. The requester should obtain verbal authorization from the department head and notify the Finance team immediately to formalize the request as soon as systems/personnel are available.

2. Can I use a PR to pay for a subscription or recurring service? Yes, but the PR should be marked as "Recurring" or "Fixed Term" to ensure the Finance team sets up the correct payment cadence and tracks the contract end date.

3. Why was my requisition sent back for "Clarification"? Most often, this occurs due to missing technical specifications, lack of comparative quotes for large purchases, or an incorrect GL code selection. Review the comments section on your rejected PR for specific feedback from the Finance or Procurement team.