Which transaction must be converted into a Purchase Order (PO)?

A Purchase Request is a preliminary document that expresses a need for goods or services and seeks approval before a formal Purchase Order is created. This transaction acts as a request to acquire specific items, and once approved, it can be converted into a Purchase Order, which is the official document sent to suppliers to initiate the procurement process.

The significance of this process lies in organizational control over procurement. By requiring that Purchase Requests be converted into Purchase Orders, companies can maintain clear records of approved expenditures, ensure budget compliance, and facilitate efficient purchasing workflows. This essential step also helps in managing vendor relationships, as it provides a clear agreement on pricing and terms prior to sending out a Purchase Order.

In contrast, Expense Reports document actual expenses incurred by employees and typically do not require conversion to a Purchase Order, as they do not initiate purchases. Invoices are requests for payment issued by suppliers after a sale has occurred and are separate from the purchasing process. Sales Orders represent sales made by a company and are relevant to revenue generation rather than procurement.