A requisition is an internal request for authorization, raised inside an organization by whoever needs something, before anything is committed. A purchase requisition asks for authorization to buy goods or services from outside. A materials or stores requisition asks to draw materials the business already holds into production. Neither one leaves the organization, and a purchase requisition is the step that comes before the purchase order rather than a version of one. Raising a purchase requisition posts nothing to a commercial buyer’s general ledger.
Hiring uses the same word for a different object. A job requisition is an approved and funded open position, the same internal request for authorization applied to headcount rather than to goods.
A Requisition Is Not a Purchase Order
The two documents face opposite directions. The requisition faces inward and asks the organization for permission to spend. The purchase order faces outward and asks a named supplier for goods or services on stated terms. Only the second one can bind anybody, because only the second one is an offer another party is able to accept, and what the order carries and when acceptance turns it into a contract is set out in purchase order.
An approved requisition is what authorizes that order. Federal petty cash buying is held to that sequence explicitly, since each purchase using imprest funds or third party drafts shall be based upon an authorized purchase requisition, contracting officer verification statement, or other agency approved method of ensuring that adequate funds are available for the purchase (Federal Acquisition Regulation, 13.305-4, Procedures). Those rules bind federal agencies rather than a private firm, so what carries over is the ordering rather than the obligation: authorization first, purchase second. The whole cycle, approval routing included, is walked through in the procure to pay process.
What a Requisition Does to the Books
Nothing, in a commercial buyer’s books. Nobody outside the organization has been asked for anything yet, so there is no liability to record and no expense to recognize. The entry waits for receipt and the supplier’s bill, on the timing test set out in incurred.
That timing also separates it from the payables control it gets tangled with. A requisition is not one of the three documents compared in 3-way matching in accounts payable. It sits upstream of all three, and by the time the match runs, the question the requisition asked has already been answered.
A purchase requisition still leaves a countable trace without leaving an entry. The number of purchase requisitions raised is one of the drivers a purchasing cost pool gets charged out on in activity based costing.
Who Raises It and Who Approves It
The person who raises a requisition should not be the person who approves it, and neither of them should be the person who later approves the supplier’s invoice. That separation is most of the control content of the step, because a request approved by its own author authorizes nothing: the asking and the permitting came from one judgment. The federal internal control standards make the general case for that split and name what gets separated. Management considers the need to separate control activities related to authority, custody, and accounting of operations to achieve adequate segregation of duties within the entity’s business processes (GAO, Standards for Internal Control in the Federal Government, paragraph 10.22). Those standards bind federal entities rather than a private firm, though the reasoning behind the split does not depend on who applies it. How it reads across a payables function is worked through in what an accounts payable outsourcing case study has to report.
Small firms and their smaller clients hit the obvious limit here. If segregation of duties is not practical within a business process because of limited personnel or other factors, management designs alternative control activities to mitigate the risk of fraud, waste, or abuse in the business process (GAO, Standards for Internal Control in the Federal Government, paragraph 10.23). The answer to a headcount limit is an alternative control activity, not an exception.
Materials Requisitions Move Material, Not Money
A materials requisition, also called a stores requisition, is the same instrument turned inward at inventory the business already owns. Nothing is bought and no supplier is involved. The document is what evidences the moment material stops being held and starts being worked on, which is the transfer described in raw materials.
Common Questions
In procurement the near synonyms are purchase request and requisition form, and plenty of systems label the same document a purchase request. Outside that setting the word keeps its older meaning of a formal demand made with authority, which is why federal tax law reaches a gain arising from an exercise of the power of requisition or condemnation (26 U.S.C. 1231(a)(3)(A)(ii)), a taking treated as an involuntary conversion in section 1231.
A job requisition is the hiring version, an internal request to fill a position that is approved and funded before recruiting starts, so a posting corresponds to a seat somebody has already agreed to pay for. It shares the mechanism with a purchase requisition, an internal ask that has to be authorized before anything external happens. It buys headcount rather than goods, and it never becomes a purchase order.
Accountably places trained offshore accountants inside US CPA and EA firms, and a trial task lets a firm grade a block of its own payables work before any client file depends on it.
