Purchase Requisition & Order Processing Flashcards
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What is a purchase requisition?
Answer: An internal request to buy items
A purchase requisition is an internal document used within an organization to formally request the procurement of goods or services. It originates from a department or individual who identifies a need and serves as the initial step in the purchasing process, signaling to the purchasing department what needs to be bought. It is distinct from external documents like invoices or shipping documents.
Who typically approves a purchase requisition?
Answer: An authorized approver or manager
A purchase requisition typically requires approval from an authorized manager or designated approver before it can proceed to the purchasing department. This approval step is a crucial internal control mechanism. It ensures that the requested items are necessary, within budget, and align with organizational policies, preventing unauthorized or unnecessary spending.
What does a purchase order (PO) represent?
Answer: A contract to purchase from a supplier
A purchase order (PO) is a legally binding document issued by a buyer to a seller, indicating the types, quantities, and agreed prices for products or services. Once the supplier accepts the PO, it becomes a formal contract. This document outlines the terms and conditions of the purchase, serving as a critical record for both parties.
Why is order processing important in purchasing?
Answer: It ensures correct and timely fulfillment
Order processing is vital in purchasing as it ensures that goods and services are procured correctly and delivered in a timely manner. An efficient order processing system minimizes errors, streamlines communication with suppliers, and tracks the status of orders from placement to delivery. This directly contributes to operational continuity and customer satisfaction by ensuring necessary items are available when needed.
What document is often matched with a PO to confirm receipt?
Answer: Receiving report
The receiving report is a crucial document in the purchasing process, as it formally records the goods or services that have been physically received. This report is then matched against the original purchase order (PO) to verify that the correct items, quantities, and specifications have been delivered. This 'two-way match' (or 'three-way match' when including the invoice) is essential for inventory accuracy and payment authorization.
What is a benefit of electronic procurement systems?
Answer: Automates and speeds up the process
Electronic procurement systems, also known as e-procurement, leverage technology to automate and streamline various stages of the purchasing process. This automation significantly speeds up tasks like requisitioning, order placement, and approvals, while also reducing manual errors and paper usage. The result is increased efficiency, cost savings, and improved transparency across the procurement cycle.
What does the term 'three-way match' refer to?
Answer: Comparing PO, invoice, and receiving report
The 'three-way match' is a critical internal control process in purchasing and accounts payable. It involves comparing three key documents: the purchase order (PO), the supplier's invoice, and the receiving report. This comparison ensures that only goods and services that were ordered (PO) and actually received (receiving report) are paid for (invoice), preventing errors and potential fraud.
Why is it important to include item specifications in a requisition?
Answer: To ensure correct ordering
Including detailed item specifications in a purchase requisition is paramount to ensure that the correct goods or services are ordered and ultimately received. Clear specifications eliminate ambiguity, reduce the risk of errors, and help the purchasing department procure exactly what the requesting department needs. This precision prevents costly returns, delays, and operational disruptions.
What step follows purchase order issuance?
Answer: Supplier fulfills the order
After a purchase order (PO) is issued and accepted by the supplier, the next logical step in the purchasing cycle is for the supplier to fulfill the order. This involves preparing, packaging, and shipping the requested goods or delivering the specified services according to the terms outlined in the PO. Only after fulfillment can subsequent steps like receiving and payment occur.