The concept of purchase requisitions, or purchase orders, is of vital importance to many businesses. In their most basic form, purchase requisitions are documents that are used to request goods or services from suppliers. They provide a record of the purchase and track the progress of the order. In this blog post, we will discuss the potential risks associated with using purchase requisitions.
We will evaluate the various aspects of working with purchase requisitions and analyze the risks they may pose to businesses. We will look at some of the issues that could arise if proper procedures and protocols are not followed when creating and utilizing purchase requisitions. We will also explore some best practices to minimize the risk of errors or mistakes when dealing with purchase requisitions. Finally, we will consider ways to ensure that purchase requisitions are managed and administered in a manner that is suitable for the needs of the business.
1. Ensuring accuracy of purchase requisitions
One of the key risks associated with using purchase requisitions is that of accuracy. To ensure accuracy, requisitions should be created and reviewed by the person responsible for the purchase, who has a clear understanding of the purchase’s purpose and budget. Furthermore, requisitions should be cross-checked against existing budgets and contracts to ensure that they are within the allotted spending limits. All requisitions should be thoroughly reviewed and approved by the appropriate supervisor before being sent to the vendor. Finally, it is important to ensure that all relevant information, such as quantity and quality of items being purchased, is accurately recorded.
2. Appropriate authorization of requisitions
One of the most important risks associated with purchase requisitions is inadequate authorization. Without appropriate authorization, requisitions can be processed and goods or services purchased that are unnecessary or outside of the organization’s budget. This can lead to lost money and resources, as well as damaged relationships with vendors. To minimize the risk of inadequate authorization, organizations should establish clear procedures for the requisition process and ensure that requisitions are reviewed and approved by the appropriate personnel. Additionally, organizations should regularly review the approvals of requisitions to ensure they are being appropriately authorized.
3. Prompt payments to vendors
When using purchase requisitions to pay vendors, it is important to ensure prompt payment. Delayed payments can lead to vendor dissatisfaction and potential issues with the vendor relationship. To ensure timely payment, organizations should set up an automated process for requisition approval and payment processing. If possible, organizations should also consider setting up a prepaid account for vendors to ensure that payments are made quickly and accurately.
4. Potential misalignment of budget and actual costs
When it comes to the use of purchase requisitions, one of the risks that should be considered is the potential misalignment of budget and actual costs. If budget and actual costs are not aligned, the organization may be unable to track where funds are being spent and the purchase requisition may not be the most cost-effective way to purchase goods or services. Furthermore, the organization may be exposed to financial losses due to incorrect or overspending, which is why it is essential that budget and actual costs are closely monitored and aligned.
5. Oversight to ensure compliance with relevant regulations
In order to ensure compliance with relevant regulations it is necessary to include an oversight process into the purchase requisition process. This oversight process should include a review of the purchase requisition, checking of supporting documentation, and approval by a qualified individual. The oversight should also include an audit process to ensure that the purchase requisition is being handled appropriately and all regulations are being followed. This oversight will help to minimize any potential risks associated with using purchase requisitions.
In conclusion, although purchase requisitions provide many benefits for businesses and their employees, there are still some risks associated with their use. Security risks, lack of visibility, and reduced efficiency are all potential issues that can arise from using purchase requisitions. However, with the right processes and protocols in place, these risks can be minimized, and businesses can maximize the benefits of using purchase requisitions.