Mastering P.O. Approvals

December 13, 2021

If you are new to the e-procurement field, or you’re a fast-moving company looking for ways to get control of all your business purchases, a purchase approval process may be just what you’ve been looking for. 

In this article, you’ll learn about purchasing approval processes and how you can create and customize your own to your business’s unique needs. You’ll also find helpful templates to help you master purchasing in your organization today.

The Significance of Purchase Orders in approval process

Harnessing the efficiency of purchase orders templates is akin to setting a foundational pillar for your hardware startup's procurement processes. A well-structured template provides a standardized format and ensures consistency in capturing vital order details. With the dynamism that hardware startups usually display, any tool that fosters streamlined, repeatable, and error-free operations is invaluable. When embedded within an automated purchase order system, such templates become the bedrock for speed, accuracy, and scalability. While automation is the engine driving the procurement car, the purchase orders template is the blueprint, ensuring the vehicle is built to perfection.

What is a purchase order?

A purchase order is a business document that is used to request the purchase of specific items from a vendor. The document lists each item that the buyer proposes to purchase, along with the per-unit and total per-item price, the delivery address, and the expected date of delivery.

Purchase orders are fairly standard across industries; however, there are four kinds of purchase orders that are used for different situations. A standard PO, which contains the most information, is commonly used for one-off or infrequent purchases. A contract PO, which does not contain specific item, pricing, or delivery information, could be used in a long-term vendor/buyer agreement. 

Keep in mind that a purchase order is not the same as a purchase requisition, which is a purchase approval form employees typically submit to a purchasing manager or other internal decision-maker. The distinction between purchase requisition vs purchase order is pivotal in the procurement process. A purchase requisition represents the initial step where a need or request for goods and services is identified internally.

This document essentially seeks permission to proceed with a purchase. On the other hand, a purchase order is the formal confirmation of this request to an external vendor, detailing the specifics of the purchase, including quantities, prices, and other terms. Recognizing the significance of this distinction ensures clarity in the procurement cycle, with each document playing a unique and essential role. If the internal decision-maker approves the purchase requisition, they then generate and submit the purchase order to the vendor.

What is a purchase order approval process?

A purchase order (PO) approval process is the specific sequence of steps that are required for a requester (typically an employee, but this can be any authorized buyer) to obtain approval for the purchase of items needed in the course of business, including managing the PO number. This includes steps that may not involve the requester, such as purchase requisition review and approval, purchase order (PO) submission, vendor fulfillment and delivery, and purchasing department tracking and payment.

Why set up a purchase order approval process?

If you are new to purchasing approval systems - particularly if you own a fast-moving company - the idea may seem cumbersome. Getting clear on your purchasing process flow chart, though, can provide you and your company with significant benefits. 

By creating and fine-tuning a purchase order process flowchart, you can shorten the time for employees to receive purchase order approvals, which means they can get their needed items more quickly and with fewer hassles. 

This means that employees are far less likely to bypass your purchasing process and purchase items with company credit cards. You get better control of where your company’s money is going, and fewer surprises when it comes to business expenses. 

Employees feel more empowered to help your organization succeed as well. This is especially true when your approval process centers around an automated purchasing platform like ControlHub, which allows employees to quickly request needed items knowing that they’ll receive fast approvals. 

How to set up a purchase order approval workflow

There are several steps involved in creating an approval workflow that functions efficiently, requires little time from busy managers and executives, and protects your company’s budget: 

  • Take inventory of your purchasing needs - if you own a small startup, your purchases may be sporadic. A growing company, though, will have to navigate ever-changing purchasing needs. Map out your growth for 3-5 years to anticipate your long-term buying needs. 
  • Identify stakeholders and approval managers - which people will be affected by which purchases? Do some teams need more approval managers than others? Are there special circumstances that would require an internal or external expert’s insights? 
  • Determine how requests will be submitted, routed to the correct approver, and reviewed for approval or disapproval. An automated platform like ControlHub can simplify this process by letting you set custom rules to automatically forward certain requests to certain reviewers. 
  • Set a benchmark for request review. Employees who have to wait for days or weeks for approvals are more likely to “go rogue” and simply charge purchases on their company credit cards. Aim for a turnaround time that everyone can live with - 24 hours, for example - and make sure your approvers deliver approvals in that timeframe. 
  • Document how purchase orders will be generated, submitted, tracked, and paid. Just as it’s important to document a step-by-step process for employees to submit requests, it’s just as important for purchasing managers to have a consistent system for placing orders and keeping track of purchases. 
  • Document approval process example scenarios - including complex situations that could involve multiple departments - so that employees and approvers can better understand how your process works.
  • Be open to ideas. The perfect purchasing approval system today might not work as well for you a year from now. Encourage and listen to input from your employees, purchasing approvers, and vendors to fine-tune your process. Every improvement you make could save your company money and empower employees to generate better results. 

What is the ideal purchase order process flowchart?

In a perfect world, the same purchase order process would be perfect for every business. Unfortunately, that’s not the case. A purchase order approval workflow that works excellently for a company in one industry could be completely inappropriate for another. The vendor approval format, likewise, may vary from industry to industry.

Want to make procurement even simpler? Find out how ControlHub’s simple, automated platform is helping businesses take control of their purchasing expenses today.

Frequently Asked Questions

What is a purchase order?

A purchase order is a business document that allows you to request specific items from a vendor. It includes details such as item descriptions, prices, delivery address, and expected delivery date. Think of it as your shopping list on steroids!

Why do I need a purchase order approval process?

A purchase order approval process streamlines your purchasing operations and brings several benefits. It reduces approval times, making it faster for employees to get the items they need. It provides better control and overview of expenses, ensuring surprises are minimized. Additionally, it empowers employees by giving them confidence that their requests will be swiftly approved.

What are the different types of purchase orders?

There are two main types of purchase orders: standard PO and contract PO. The standard PO is used for one-off or occasional purchases, while the contract PO establishes a long-term agreement with a vendor. It's important not to confuse the purchase order with a purchase requisition, which is the form employees fill out for approval before a purchase order is created.

How do I set up a purchase order approval workflow?

Setting up a purchase order approval workflow involves several steps. First, take inventory of your purchasing needs. Next, identify stakeholders and approval managers. Determine how requests will be submitted and routed to the right approver. Set a benchmark for request reviews to ensure a quick turnaround time. Document the process for submitting requests and tracking purchases. Finally, be open to feedback and continuously improve the system based on input from employees, approvers, and vendors.

How can automation help with purchase order approvals?

Automation, such as the ControlHub platform, can greatly simplify and streamline the purchase order approval process. It allows you to create custom rules and automate the routing of requests to the appropriate approver. Automation reduces manual tasks, saves time, and ensures a consistent and efficient workflow. ControlHub's automated platform revolutionizes the way businesses handle their purchasing expenses, taking control to the next level of simplicity.

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