Approval workflow
The set of rules that decides who must approve a purchase, expense or invoice, in what order, before it can be paid.
In short
- Approvers usually depend on the amount, the department and the type of spend.
- A delegation of authority document says who can approve what.
- The person who approves should not be the person who requested or pays.
An approval workflow routes a request for money to the people who must agree to it. It applies to purchase requisitions, expense reports and supplier invoices, and it answers three questions: who approves, in what order, and what happens if they don't respond.
How routing is decided
- Amount: small invoices go to the budget owner; larger ones also need a director or the CFO.
- Department or cost centre: the manager of the spending team approves.
- Type of spend: software may also need IT approval; contracts may need legal.
- Exceptions: an invoice without a purchase order, or over its order amount, may need an extra step.
The control behind it
Approval workflows put segregation of duties into practice. The person who asks for a purchase, the person who approves it and the person who pays it should be different people. A written delegation of authority, sometimes called an approval matrix, sets the limits for each role so approvals are consistent and auditable.
Keeping it moving
Workflows that are too strict create bottlenecks. Reminders, delegates for people on leave, mobile approval and approving only exceptions rather than every line all help. Every approval should be logged, with who approved and when. The audit trail is complete.
Worked example
A three-tier matrix
At a 200-person company, invoices up to $5,000 need the budget owner, invoices from $5,000 to $25,000 also need the department director, and anything above $25,000 also needs the CFO. A $12,400 marketing invoice goes to the marketing manager, then the marketing director, and is paid once both have approved.