Approving requisitions & Requisitions and purchase orders

Typically, department managers have control over spending within the limits of their departmental

budgets. There are signing limits set however, as to expense amounts a manager can approve; expenses

over that approval limit have to be authorized by a more senior manager in the reporting line (i.e., “up the

food chain”). Suppose for instance, a department manager has a budget limit for total supplies expense

set at $20,000 for the year, and a signing limit of $1,000 on any given purchase. That manager will

therefore be able to approve an individual requisition for $300 (since it is less than $1,000), as long as the

total spending is within the overall budget limit of $20,000. If a requisition is worth $1,500 however, then

the managers boss, or someone more senior up the reporting line would have to approve the requisition

before the requisition could be passed on to the Purchasing department for further processing.

Some have suggested that the Purchasing department should be involved in the approval process, such

that if a department is over-spending, the Purchasing department should be able to refuse to act on the

requisition. Explain why this approach is not a good idea. Note that the answer is not in the textbook —

you’ll have to think your way through this one.

To receive credit, your posting must be at least 75 words, in clear, well-written English, and must

effectively address the question asked.

In the procure to pay process, the responsibility for creating a requisition and the responsibility for

creating a purchase orders are separated so that typically, one person is not permitted to do both. Why is

this separation a good business practice?

Involving the Purchasing department in the approval process to refuse to act on a requisition if a department is overspending may not be a good idea for several reasons. First, the Purchasing department may not have enough knowledge of the department’s operations and budget limitations to make informed decisions. This may result in unnecessary delays and frustration for the department manager and their staff.

Second, the Purchasing department’s primary responsibility is to ensure that goods and services are procured at the best possible price and quality. Allowing them to have a say in approving requisitions may lead to conflicts of interest or prioritization of their own goals over the needs of the department.

Finally, involving the Purchasing department in the approval process may increase bureaucracy and slow down the procurement process, which could negatively impact the organization’s efficiency and effectiveness.

Separating the responsibility for creating a requisition and creating a purchase order is a good business practice as it helps to ensure accountability and prevent fraud. By having different individuals responsible for each step, it reduces the risk of one person having too much control over the procurement process. Additionally, having multiple individuals involved in the process provides checks and balances, which helps to reduce the risk of errors and fraud. Overall, the separation of responsibilities promotes transparency and accountability, which are essential for effective procurement management.