How to Set Up a Purchase Order Approval Process
You’ve just completed the paperwork for your next purchase order. Great! Mission accomplished. But wait. Before you send it off to your supplier, ensure you have it reviewed and approved by your manager. In many cases, you were likely just in a forecasting meeting with your boss and he or she already verbally approved the purchase order. However, as a safeguard for the business, an extra set of eyes is advised to not only review the written document for possible mistakes, but also to make sure the dollar amount is aligned with the company’s finances.
This blog post walks you through how to set up your approval process and the time considerations that should be factored into your purchase ordering process.
Designating approval thresholds
When considering approvals, consider both the purchase order amount and who the approver should be. For example, you can set up your approval process like below:
|If the purchase order is greater than||Require approval from|
|$1,000,000||Chief Operating Officer|
As the purchase order is sent through the chain of command for approval, ensure any previous approvals are shown with their initials or in writing in a centralized place so the approvals can be found later if any issues arise.
Deadlines for approvals
You and your supply chain team have to plan for the future to ensure goods are produced and delivered on time. With that in mind, if your normal production lead times are eight weeks and freight is considered for international or domestic shipments, adding in that buffer time will help you determine when you need to submit your purchase orders.
This often means placing orders 2+ months prior to actually needing the goods. Depending on the size of your organization and also the value of your order, the purchase order may require multiple levels of approval, and we recommend giving yourself a two-week time frame to receive all the necessary approvals required for the purchase order.
When conducting purchase plans in your forecasting meetings, make sure to factor in shipment times, supplier lead times, and purchase order approval times when projecting the final delivery date of your goods.
Following up for the approval
If you already have a cloud-based ERP system, you can create a digital approval process that we outlined above in your ERP. The system will automatically follow up with the assigned approvers when a purchase order has not been approved within 24 hours. This can be quite useful for organizations of a certain size, but ERPs are also fairly pricey for companies that only need to follow up with purchase order approvals.
For businesses looking for an affordable and easier way to follow up on unapproved purchase orders, try Anvyl Tasks. The Anvyl collaboration engine allows you to create a purchase order, save it as a draft, and assign a task for your manager to approve it. If there are multiple levels of approvals required, simply set up another task in the system and assign it to the next approver.
How to set up purchase order approvals
Customers of Anvyl now have access to create and use unlimited Tasks with their purchase orders. If you don’t currently use Anvyl and would like to learn more, talk to a specialist today.