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To start the procurement process, you'll typically begin by creating a Procurement Requisition. This document is essentially a formal request within your organization to purchase the goods or services you need.
Once the Procurement Requisition is approved, the purchasing department will take over and issue a Purchase Order to the vendor you've chosen. The Purchase Order is a legal document that outlines the details of the purchase, such as the item description, quantity, price, delivery date, and payment terms.
This blog post will dive deeper into the differences between a Procurement Requisition and a Purchase Order to better understand their roles in keeping your IT Procurement process running smoothly.
What is Purchase Requisition?
A purchase requisition is an internal document used to request approval for buying goods or services. Employees submit it to relevant managers or departments for review. Once approved, it authorizes the issuance of a purchase order to vendors, ensuring controlled and documented procurement.
When you're looking to bring a new SaaS product into your company, the first step is to put together a Purchase Requisition. This is basically a formal request to buy the software you need.
In your Purchase Requisition, you'll want to include some key details:
1. Your info: Who you are, what team you're on, and how to reach you.
2. The SaaS details: What the software is called, which version you need, and any specific features you're looking for.
3. The why: Explain how this SaaS product is going to help your company and why it's worth buying.
4. Money talk: Estimate how much the SaaS is going to cost and make sure it fits within your team's budget.
5. Get the green light: Make sure you've got the okay from your manager or anyone else who needs to sign off.
The main goals of a Purchase Requisition for SaaS are:
- Nailing down the specific SaaS solution that's going to work best for your company.
- Once you submit the Purchase Requisition, it alerts the procurement team that it's time to start looking for the right SaaS vendor.
- Keeping an eye on the budget to make sure the SaaS fits within your company
- Getting the right approvals ensures the SaaS product checks all the boxes for your company's policies, security needs, and legal requirements.
What is a Purchase Order ?
Once your Purchase Requisition gets the go-ahead, the procurement team takes over and sends a Purchase Order to the SaaS vendor you've chosen. The Purchase Order is a legal document that lays out all the nitty-gritty details of the purchase.
Your typical Purchase Order for a SaaS product will include:
1. The basics: Your company's info and the vendor's details.
2. What you're buying: A thorough description of the SaaS product, including the specific version, features, and any customizations you need.
3. How much and how many: The agreed-upon pricing or you've negotiated a different rate, the new price will be reflected in the renewal Purchase Order.
4. When you need it: The expected delivery date or activation date for the SaaS
5. How you'll pay: The payment terms, like the length of time you're extending the SaaS contract for, whether it's another year or a different term.
The main goals of a Purchase Order in SaaS procurement are:
- The Purchase Order serves as a formal agreement between your company and the SaaS vendor, legally binding both parties to the terms outlined
- It ensures that both your company and the vendor have a shared understanding of what's expected
- It acts as a single point of reference for the purchase, making it easier for various departments (like finance and IT) to coordinate and fulfill the order
- With a Purchase Order in place, you can easily track and manage your SaaS purchases, including delivery, payment, and any future renewals or upgrades
Difference between Purchase Requisition and and Purchase Order
Apart from the general aspects (in the image above), there are some notable differences in the outcomes of Purchase Requisitions (PRs) and Purchase Orders (POs) in SaaS procurement.
A) Purchase Requisitions (PRs):
- A PR, being an internal document, primarily serves to align the organization's needs and resources.
- If approved, it results in the procurement team moving forward with the vendor selection and negotiation process.
- However, a rejected PR means the requesting department must reevaluate its requirements or find alternative solutions.
B) Purchase Orders (POs):
- A PO, as a formal agreement with the SaaS vendor, has more significant and far-reaching outcomes.
- An accepted PO sets the stage for a successful SaaS implementation, as both parties are clear on the terms of the purchase and their respective obligations.
- This clarity helps ensure a smooth onboarding process, effective use of the SaaS product, and a productive ongoing relationship between the company and the vendor.
- However, if a PO is rejected or canceled, the consequences can be more severe.
- Depending on the timing and reasons for the cancellation, there may be financial penalties or legal repercussions.
- A canceled PO could also mean delaying or forgoing the benefits the SaaS product was expected to bring, which could impact the company's operations and competitiveness.
How Spendflo Helps Effective Strategies for PR and PO to Streamline Your Procurements
Spendflo Assisted Buying
Spendflo’s assisted buying helps you to easily create, track, and approve PRs, ensuring that all stakeholders are aligned on the need for a SaaS product and its impact on your budget. Once a PR is approved, we assist you in identifying the best SaaS vendors, negotiating favorable terms, and creating POs that clearly outline the details of the purchase.
We also help you manage ongoing SaaS contracts by automating the renewal process, provide timely alerts, and insights into granular usage and spend patterns.
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