All you need to know about purchase order approval workflow

The purchase order (PO) approval workflow is a critical component of the procure-to-pay process. It involves obtaining approvals from concerned stakeholders before a purchase order can be issued to the supplier. Well-designed approval workflows help ensure compliance, prevent unauthorized spending, and provide necessary oversight of procurement activities. This article provides.

Objectives of the PO approval workflow

The core objectives of the PO approval process are:

  • Validate procurement compliance: 

A core objective of PO approvals is to validate compliance of each procurement with organizational policies and guidelines. As the final check before committing with suppliers, it ensures any non-compliant aspects are flagged prior to PO creation. The approvers verify adherence to preferred supplier lists, pricing agreements, purchase limits etc. set as per company policies and procedures. For instance, compliance checks would prevent maverick purchases from unapproved suppliers or at rates exceeding contracted rates. By ensuring every PO is compliant, the approval process provides critical reinforcement of company procurement policies. Any policy violations are halted before execution through the compliance checks in the approval workflow.

  • Provide oversight:

The purchase order approval workflow enables overseers in the organization to review and monitor proposed purchases before final commitment to suppliers. By requiring approvals before PO issuance, it allows authorized managers to assess necessity, compliance and optimal use of budgets for procurements. Rather than just the requestor deciding on purchases, the multilayered review ensures accountability for spending decisions aligned to business needs. Insights from finance, category managers and leadership provide holistic oversight on the most efficient and prudent use of procurement budgets through the PO approval process.

  • Segregate duties:

The PO approval workflow prevents concentration of authority by segregating the different roles in the procurement process. The initial requester of goods/services is detached from actual PO creation, which is performed by the procurement function. Approval authority is separately delegated to authorized managers. This segregation of duties across request, procurement execution and approver prevents conflict of interest that could arise from concentration of powers. It also enables specialized focus on the distinct roles to enhance efficiency and compliance.

  • Prevent errors: 

The review and approval of purchase orders before supplier confirmation provides the opportunity to prevent potential errors in details like quantities, rates, delivery dates etc. By having both the procurement team and approving authorities validate the accuracy of PO details before final submission, any mistakes made in translation of initial request or PO creation can be rectified proactively. This helps prevent wrong supplies, pricing, invoice disputes etc. arising from inaccurate PO creation that could have been avoided through the approval oversight.

  • Control spending:

The PO approval process allows control over procurement budgets by acting as a checkpoint to verify available funds before commitments. By integrating the workflow with budget data and planning, approvers can ensure spend is within sanctioned budgets. Approval authorities with broader view of budgets needs across departments helps minimize maverick or unjustified spending. The approvers also prevent unnecessary rush orders for non-critical purchases through oversight by aligning orders to planned timelines. This enables optimal utilization of budgets through controlled spending.

Typical approval workflow stages

A typical PO approval workflow involves the following key stages:

  • Requisition
  1. The requestor raises the purchase requisition with details like item, quantity, estimated cost, etc.
  2. May require the creation of a shopping cart from catalogs
  • Initial review
  1. Basic compliance checks by the buyer
  2. Ensures requested goods and services are appropriate for the requestor
  • Budget confirmation
  1. Verifies the available allocation for the proposed expenditure
  2. Checks against department budgets or project-sanctioned amounts
  • Final authorization
  1. The senior manager provides the final PO approval.
  2. Reviews broader compliance and necessity

Approval parameters

Typical attributes examined during PO approvals include:

  • Purchase value: a higher value requires additional approvals.
  • Requestor authority: Based on role, grade, etc.
  • Purchase type: capital vs. operational expenditure
  • Contract compliance: checking against existing contracts
  • Preferred suppliers: Adherence to supplier preferences
  • Inventory levels: for stocked items

Setting approval limits

Approval limits define the authority delegated to requestors and approvers based on parameters like:

  • Purchase value: higher limits for senior management
  • Cost center: limits specific to departments, locations, etc.
  • Purchase type: differing limits for services, stock, assets, etc.
  • Risk: lower limits for high-risk categories

Approval rules configuration

Rule-based workflows automate the routing of POs to concerned approvers based on:

  • Hierarchical approvals: sequentially ascending approval levels
  • Conditional approvals: additional approvals based on criteria
  • Parallel approvals: multiple approver groups simultaneously

Integration with request and approval tools

PO approval workflows can leverage procurement request and approval tools for:

  • Raising purchase requisitions
  • Accessing catalogs, contracts, etc. during the approval process
  • Configurable approval matrices and email notifications
  • Mobile apps for on-the-go approvals
  • Analytics on approval metrics like cycle time, pending approvals, etc.

Features for transparency and collaboration

PO approvals can be enhanced through capabilities like:

  • Audit trails capture approval history, comments, etc.
  • Visibility into pending approvals through dashboards
  • Collaboration tools for approver groups like chat, document sharing, etc.

Automating repetitive approvals

Rules-based auto-approval can be configured for scenarios like:

  • Recurring purchases below a value threshold
  • Replenishment from preferred suppliers
  • Orders against existing contracts

This avoids delays for low-risk purchases.

Linking with budget and planning

Integration of PO approvals with budgeting and financial planning enables:

  • Checking against budgets during the approval process
  • Alerts on budget utilization through approval spend
  • Tighter alignment between procurement and planning

Analytics for enhancing approvals

PO approval data can feed analytics to provide insights like:

  • Pending approval workload across the organization
  • Average approval turnaround times by department, approver, etc.
  • Budget utilization through PO approvals
  • PO value analysis to identify opportunities for auto-approval limits

Role in eProcurement

Automated PO approval workflows allow the encapsulation of paper-based manual approvals into eProcurement tools for efficiency through:

  • Online approver matrix configuration
  • System notifications for pending approvals
  • Mobile access enabling anytime approvals
  • Seamless integration into a broader procure-to-pay cycle


An optimized PO approval workflow balances oversight, compliance, and speed by leveraging automation and analytics. Approval limits, conditional routing rules, and auto-approvals minimize delays for low-risk purchases. Integration with planning and budgeting, coupled with analytics, provides data for continuous improvement. As part of the broader eProcurement ecosystem, automated PO.

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