What is a purchase requisition in construction?
In construction, a purchase requisition is a document generated by a certain sector of the company which notifies the purchasing department on items that it needs to order. This document normally includes the quantity of the items and the time-frame in which they are required. In other words, a purchase requisition is a request sent from one department to the purchasing department for items to be obtained. Purchase requisitions are the first purchasing documents created, are internal documents, and initiate purchase orders. Since they are requests that employees make for materials they need to complete their task at hand, it is crucial that they are organized and completed consistently.
Why are purchase requisitions important in construction?
Purchase requisitions initiate purchase orders, so they are essential in keeping an accurate account on material and service costs. Instead of allowing employees to email managers with the request, integrating standardized purchase orders is a better option because it permits the management of employee budgets.
Using purchase requisitions will allow managers to track employee budgets by tracking their spending. Knowing exactly how much they are spending and what they are spending money on will allow managers to analyze budgets and determine how the company can save money. The process also allows managers to quickly see if employees went over budget and approve or disapprove purchase requests.
Construction companies should create a standardized purchase requisition form for all employees to use. The creation of a purchase requisition form will cut time out the purchasing process which will boost employee productivity and efficiency. It is important that these documents are stored in an organized manner, so we suggest that you use a cloud-based software such as eSUB. Having documents such as purchase orders and purchase requisitions organized and readily available has several benefits. They are the ability to stop overpaying for invoices, to add flexibility to avoid project delays, to verify the delivery of materials, and to monitor subcontractor retainage.
Many contractors continue to skip the purchase order/purchase requisition process because they believe that it is too time-consuming even though it has many benefits. They fear to deal with all the paperwork typically associated with the process and sometimes skip using purchase orders with suppliers that they have long-term relationships with. Not using purchase orders and purchase requisitions is a huge mistake in construction management. It can cost companies significant amounts of money and can severely complicate routine business transactions. Purchase orders serve as concrete evidence for transactions and tie parties to agreements legally which ensures security in purchases. If a deal goes wrong and no purchase order was used, or it cannot be found, both parties can lose money and be in a complicated legal situation with no record of what went wrong.
How to transition from purchase requisitions to purchase orders:
Once a standardized process for completing purchase requisitions is established, the process for completing purchase orders must also be established. This can be done by first creating a purchase order form, which is similar to the purchase requisition form, and then notifying your supplier that you will use purchase orders for future transactions. Most likely, the supplier will be happy to hear this news because the process will make transactions more secure and easier for both of you.
In this process, the manager or approver will receive purchase requisitions electronically and then send purchase orders to the supplier depending on if they are approved or not. This system will help both parties because the supplier will be able to communicate any concerns with the order before payment is received.
Using both purchase requisitions and purchase orders will provide security in transactions and allow managers to track employee budgets easily. It will also make the whole purchasing process between businesses easier because the forms will state what is expected from each party. When dealing with these documents, a construction software such as eSUB is helpful because it allows users to track material costs by labor activity and even detailed progress on different phases of the project. It will also enable the entire purchasing process to be sped up by allowing for faster approvals. For subcontractors to be more efficient and stay within budget, we suggest that they understand the importance of purchasing documents, and take the necessary steps to use them effectively.