Purchase requisitions and approvals in Dynamics 365 Finance

For enterprise organisations, every meaningful spend should start as a purchase requisition — a formal request from an employee asking the organisation to commit to buying something. The requisition routes through approval, gets approved (or rejected), and then converts to a purchase order that the procurement team executes. Dynamics 365 Finance handles the full lifecycle.

The requester experience

An employee identifies a need:

• Buy office supplies.
• Engage a contractor.
• Purchase software licences.
• Order equipment.
• Pay for training.

Through a self-service workflow (often via a Power Apps interface or directly in F&O), the requester:

1. Creates the requisition — selects items / services from the catalogue, enters details, attaches supporting documents (quotes, justifications).
2. Submits — the workflow engages.
3. Tracks the requisition's status as it moves through approval.
4. Receives notification when approved (or rejected with reason).

The approval workflow

F&O's workflow engine routes the requisition:

• Manager approval — first line, the requester's direct manager.
• Budget check — does the requested amount fit within the cost-centre's available budget?
• Procurement category approval — different category-specific approvers (IT requisitions to IT lead, HR requisitions to HR lead).
• Threshold-based escalation — over €10,000 requires director; over €50,000 requires VP; over €100,000 requires CFO.
• Compliance review — for specific scenarios (contractor engagements need legal review).

The exact routing is configured per organisation; F&O's workflow engine accommodates substantial complexity.

Approval responses.

• Approve — moves to the next step or, if final, marks requisition approved.
• Reject — requester is notified; requisition can be re-submitted with changes.
• Request change — the approver asks for modifications before approving.
• Delegate — pass to a substitute approver.
• Recall — the requester withdraws their request.

Each action is logged with timestamp, comments.

Budget control integration

For organisations using budget control (mandatory in public sector, common in cost-controlled commercial operations):

• The requisition's projected expense reserves budget on submission (pre-encumbrance).
• Approved requisition converts pre-encumbrance to encumbrance.
• The encumbrance commits budget against the cost centre.

If submitting a requisition would exceed available budget, the workflow either blocks (hard-stop) or warns (soft, requires override). Public Sector configurations typically run hard-stop.

Procurement category management

Spend is classified into procurement categories — a hierarchical taxonomy:

• IT > Software > SaaS subscriptions.
• IT > Hardware > Laptops.
• HR > Recruitment > Headhunter fees.
• Marketing > Events > Sponsorships.

Categories drive:

• Approval routing — different categories to different approvers.
• Catalog visibility — what items / services requesters can see.
• Reporting — spend analysis by category.
• Sourcing policy — preferred-vendor rules per category.

Vendor management

Approved requisitions can be sourced from:

• Preferred vendors — pre-qualified with negotiated pricing. Default for many categories.
• New vendors — requires vendor onboarding workflow first (financial, compliance, regulatory checks).
• Punch-out catalogues — for commodity items, requesters browse external vendor catalogues (Amazon Business, vendor-specific portals) with prices and details flowing back into F&O.

Conversion to purchase order

Once a requisition is approved, the procurement team:

• Manually converts — reviews and creates the PO.
• Auto-converts — for low-value, low-risk categories, the system auto-creates the PO without manual intervention.
• Combines requisitions — multiple small requisitions for the same vendor can combine into one PO.

The PO becomes the formal commitment to the vendor.

Procurement controls beyond requisitions.

• Three-way matching — at invoice posting, F&O matches the invoice to the PO and the receipt; mismatches require explicit override.
• Contract compliance — POs reference framework contracts; pricing pulls from agreed rates.
• Receiver reporting — once goods arrive, they're received against the PO; this triggers accruals.

Reporting.

• Open requisitions — pending approval per stage.
• Approved-but-not-converted — requisitions waiting for procurement.
• Spend by category — analytical view of procurement activity.
• Average approval cycle time — workflow performance.
• Off-contract spend — requisitions sourced outside preferred vendors.

Common pitfalls.

• Approval workflow too complex — every step requires sign-off; requisitions take weeks.
• Insufficient category structure — everything is "Other"; reporting is useless.
• No conversion automation — every requisition manually converted; procurement is a bottleneck.
• Catalogue out of date — requesters can't find what they need; raise ad-hoc requisitions.

Operational reality

Mature procurement processes route the bulk of spend through structured requisitions; only true emergencies bypass. The discipline produces visibility, control, and cost savings — usually several percent of total procurement spend.