What is requisition to pay?
Requisition to pay covers the purchase to pay (P2P) process starting with the creation of a purchase requisition. A purchase requisition is a formal document used to purchase something needed at your company.
The purchase requisition is filed with the department manager or procurement team to complete the purchasing of the good or service. The requisition to pay process is integrated and aligned with the same steps as the source to pay (S2P) or P2P process.
Why use a purchase requisition?
Purchase requisitions help bring transparency to procurement, allowing the procurement team to track the purchasing needs across departments, identify opportunities for bulk ordering (and discounts), prevent duplicate purchases, and ultimately reduce the risk of maverick spend.
For companies that work in highly regulated industries, purchase requisitions help track company assets. The requisition form is proof that a specific quantity of products was ordered, and can be used when the products arrive to ensure the delivery was made.
Steps in the requisition to pay process
S2P and P2P processes integrate purchasing and accounts payable tools to become more efficient. Here are the stages to either the source to pay or procure to pay process:
- Select products/services: the organization identifies an internal need. The procurement team will learn more about the specifications of the product needed and either source it from an approved list of vendors or issue an RFP.
- Sourcing, if applicable: if the organization is using S2P, the sourcing process occurs here. These steps include:
- Evaluate potential vendors. This analysis may include data points such as market trends, historic spend, and organizational goals for product development. Vendor candidates are added into the buyer’s procurement software.
- Issue an RFx: the buyer issues an RFQ, RFP, RFI, or some combination of those documents. Vendors are invited to submit bids.
- Evaluation and award: vendor bids are evaluated by the buyer and the winner is chosen. If applicable, the purchase order or contract is created.
- Contract negotiation and approval: both parties review the contract, negotiate as needed, and sign the contract.
- Ordering: The procurement team will create an internal requisition order needed for the purchase to be made. The buying organization will also issue a purchase order to the supplier.
- Receipt and reconciliation: the product is received and checked against the purchase order. The buyer issues a receipt and records the transaction.
- Invoicing and payment: the supplier sends an invoice along with a payment deadline. The accounts payable team pays the invoice and the transaction is complete.
Requisitioning takes place in step three. It is the process of formally requesting a good or service with a purchase request. Once the requisition is approved, the purchase order is issued and the purchasing process begins.
Requisition to pay can be viewed as the later stages of the procure to pay cycle. By isolating these final steps, organizations can identify the people who need to be involved at any one time, while also creating a clear record—a digital paper trail—of purchases that anyone in procurement, finance, or management can follow when they need to.
Automating requisition to pay
The procure to pay process can feel burdensome to internal teams and to vendor partners. By the time the organization reaches the requisition to pay process, there have likely already been multiple rounds of approval, vetting, and forms detailing what is needed. Adding another layer — a purchase requisition and purchase order — can feel frustrating and encourage some to spend off-book.
For this reason, the steps in the requisition to pay process — creating an internal requisition order, issuing a purchase order, providing a receipt, and processing an invoice for payment — can benefit dramatically from automation. Procurement platforms like Fairmarkit offer automation that can dramatically speed up purchase requisition approvals and help consolidate purchase data that is easy to audit and adds value to an organization.
Ideally, the requisition-to-pay process helps organizations identify bottlenecks and overcome communication breakdowns. Procurement teams should look for a system that is easy for buyers to access, notifies approvers and keeps a digital record of purchases, and reduces wasted time and confusion around who is responsible for what part of the approval process.
Automating requisition to pay can help vendors get paid faster and give organizations a way to build stronger supplier relationships. Streamlined requisition to pay processes help ensure suppliers are paid on time for their work, helping to create trust and loyalty between organizations.
Ultimately, requisition to pay is a key part of the procurement lifecycle, and one that is often overlooked. To learn more about purchasing, check out our blog, The Source.