Payment Requisitions and Small Business
When you’re a one-person business, you can easily track expenses because you’re the only person requesting goods and services, and then paying for them by check or credit card. As your enterprise expands with employees, the people creating the expense, approving it and paying for it may differ. A payment requisition tracks where the money is going.
Employees can fill a paper form manually or fill out form fields on a computer. Requiring consistent data ensures that all information necessary to track and approve a purchase is supplied and located in one place. Aside from the previously described signatures, the form must also contain a tracking number, the date of the request, the reason for the payment, the amount requested, the date the goods or services were delivered, and the name and contact information of the supplier. Depending on the complexity of the goods and services, the form may also contain contract and purchase order numbers, the percentage of a total contract that was fulfilled to obtain payment, the schedule of negotiated payments and balance remaining, and the location and employee to whom goods and services were delivered.
A payment requisition is a form that requests that payment be sent to a supplier for delivered goods or rendered services. Not all expenses require this form – just those that meet a minimum amount, such as $1,000, or those that fulfill a contract or purchase order. The request may be initiated by an individual fulfilling a business-related need, or through an invoice from a supplier. The form contains at least the names and signatures of at least three authorities: the person making the request such as a clerk buying office furniture, the person approving the request such as a higher-level manager, and the person cutting the check such as an accountant.
The payment requisition is typically part of a longer paper trail that documents how money in your business is being spent. This ensures that all expenses are justified, guards against fraud and proves that all rules and regulations are being followed. For example, if your business supplies services to a government agency, that office may require that you pay all your subcontractors within 30 days of receiving payment. The payment requisition officially shows how you comply with that requirement, and is something you can send to the government if they request documentation.
Depending on the complexity of the delivery, the paper trail may start with your request for bids to your suppliers, as you try to find the best terms for a product or service that your business needs. When you decide on acceptable terms, you then negotiate a purchase order or contract with a specific supplier. He delivers the goods or services, sometimes over a scheduled period of time, and sends an invoice. The person processing the invoice initiates a payment requisition that requires the approvals of all relevant staff. The trail ends with the check that goes to the supplier.