What approval is for
Approval is the moment someone other than the buyer looks at an order before the company is committed to it. It catches the wrong supplier, the old price, the extra zero and the order nobody needed. It is not a signature for the file: an approver who never questions an order is a delay, not a control.
Approval works best before the supplier sees the order. Once the goods are on a truck, a refusal costs a return trip and a strained relationship.
TipWrite down what an approver is expected to check, so approving means the same thing whoever does it.
Keep raising, approving, receiving and paying apart
The strongest control is not who approves but that no single person runs a purchase from start to finish. Someone who can raise an order, approve it, receive it and pay for it can buy anything, from anyone, without a second pair of eyes.
In a small team one person often wears two hats. If so, keep at least the buyer and the approver apart, and have the owner look over the payments each week.
- The buyer raises and submits the order
- A manager or the owner approves it
- The warehouse receives and counts the goods
- Accounts enters the bill from the receipt
- A different person releases the payment
Decide what deserves a closer look
Many companies set approval by amount: small orders by a manager, large ones by the owner. If your system has a single approval step, you can still apply the rule, by limiting who holds approval rights and writing down which orders the owner must see first. What matters is that the approver checks the things that cost money.
- The price against the last order and the price list
- The quantity against stock on hand and recent sales
- The supplier, its payment terms and its currency
- Orders split into pieces just under a limit
- Any supplier you have not bought from before
Lock the order once it is submitted
An approval means something only if the order cannot change afterwards. If a buyer can edit quantities or prices after sign-off, the approver approved a different order. Any change should send the order back to draft and through approval again.
Keep a record of who approved each order and when. When a dispute with a supplier comes up months later, that record shows what was agreed, at what price, and who agreed it.
TipIf a supplier changes its price after approval, cancel and raise the order again rather than adjusting it quietly.
Keep approvers few, and cover their absence
Give approval rights to as few people as you can without orders stalling. Two is usually right for a small distributor: the owner and one manager. One approver is a bottleneck the week they travel; five approvers means nobody feels responsible.
Set a target for how fast orders are approved, such as the same working day, and look at what waits longer. An approval step that takes three days teaches buyers to order by phone first and raise the order later.
No approved order, no goods
Approval only protects you if goods cannot come in without it. Tell the warehouse not to accept a delivery with no approved order behind it, and tell suppliers that an order is valid only once approved. Urgent purchases still go through the same steps, just faster.
The same holds for the bill. A supplier invoice for goods nobody ordered should go back to purchasing, not into the books, so an unapproved purchase cannot reach payment by the back door.
TipName a fast-track approver for urgent orders rather than letting them skip approval.
Review approvals every quarter
Once a quarter, look at who approved what. Check for orders approved by the person who raised them, suppliers whose prices crept up order by order, and orders split to stay under a limit. Remove approval rights from anyone who no longer needs them.
Look as well at how approvals are spread. If one approver signs almost every order, the second is a name on paper. If orders are routinely approved within a minute of being submitted, nobody is reading them. Both patterns are easier to fix early than after a costly order slips through.
Checklist: Purchase approval checklist
- Write down what an approver must check
- Keep the buyer and the approver apart
- Give approval rights to two or three people
- Decide which orders the owner must see first
- Make submitted orders uneditable
- Refuse deliveries with no approved order
- Set a same-day target for approvals
- Review approvals and rights every quarter