Procurement Approval Process – Key Strategies for Optimal Performance

Understanding the Procurement Approval Workflow

The entire procurement function in an organization is built upon procurement approval workflows. Multi-level procurement approvals are common in enterprises that have widespread procurement operations.

Role-based approval hierarchy is commonly practised by organizations to enable quick and seamless approval processes. However, even when role-based approval is followed, some organizations struggle with visibility and transparency into procurement approvals. 

The procurement approval workflow is a critical component of the procurement process, which ensures that purchases are compliant with company policies, budgets, and regulatory requirements. The procurement workflows vary in every organization, but the key components of a procurement approval workflow remain the same. 

Requestor 

The individual who initiates the purchase request is referred to as the requestor. A request may be initiated for a purchase requisition, purchase order, or payment from a vendor after goods are delivered. 

Approval levels 

There is only one level of approval in a simple procurement approval workflow. However, in multi-level procurement approvals, there is a hierarchy of approval levels that needs to be adhered to. Whether it is a single-level or a multi-level approval process, there are some conditional approval rules that approvers have to follow. 

Approver/s 

The person/s responsible for reviewing and authorizing the request is referred to as the approver. Multi-level procurement approval workflows have approvers at each level of approval. 

Approval rules or thresholds 

Conditional approval rules or thresholds are predefined criteria that clarify when a procurement request requires approval and by whom. The conditions that need to be satisfied by the request for approval need to be clearly defined in order to bring standardization into the approval process. 

We mentioned earlier that procurement approvals are an important part of the procurement process. In this context, it is to be noted that these workflows play a crucial role in compliance. How do procurement approval workflows help in procurement compliance checks and control?

• Prevent unauthorized or fraudulent purchases
• Maintain clear audit trails 
• Ensure adherence to procurement policies and budgets
• Facilitate collaboration and communication both within and outside the team

Types of Procurement Approval Workflows

Before getting into the details of procurement approval workflows, let us first understand the types of procurement approval workflows. Purchase approval workflows are mainly of 3 types – Linear, Parallel, and Conditional. 

Linear procurement approval workflow 

This is a sequential approval process in which the request moves from one approver to another in a linear or sequential manner. Each request is reviewed by the approver to either approve or reject the request.

Approved requests move to the next reviewer in the workflow. This type of workflow is best suited for organizations that have a well-defined approval hierarchy and a thorough review is required at each level of approval.

A purchase request for a high-value item may need to go through multiple levels of review from the department head, the finance manager, and the CEO. 

Parallel procurement approval workflow 

Typically, parallel workflows are where multiple approvers review the request simultaneously, thereby, reducing the cycle time for approvals. Such workflows are especially useful where multiple stakeholders need to review the request before final sign-off. An example of parallel approval workflows would be a purchase request being reviewed by the IT department, legal, and finance department simultaneously. 

Conditional procurement approval workflow 

The conditional type of approval workflow works on predefined conditions based on business rules. The predefined conditions could be purchase amount, category, or vendor. These types of workflows allow for more flexibility and automation in the approval process. A request for an item below a certain dollar amount might automatically be approved by a designated approver, while requests for higher dollar amounts may require a higher level of review. 

Steps in the Procurement Approval Process

The procurement approval process comprises 8 steps. A deeper understanding of each step in the process is a must to optimize the process. 

1. Purchase request submission 

This step can be considered the trigger point of the approval workflow. Identification of the need for goods or services and preparation of the purchase requisition with complete details on the requirement are the key events in this step. The purchase requisition form includes details on items like quantity, cost estimates, justification of need, and delivery timeline. Purchase requisitions are internal documents that need approval for initiating a purchase. 

2. Budget validation 

Once a purchase requisition is created, the finance or budgeting teams review the request to ensure that sufficient funds are allocated for the purchase. Thorough and accurate budget validation ensures that expenses are aligned with the approved finance plan and prevents maverick spending. 

3. Line manager approval 

Once the budget is validated by finance and purchase managers, it is routed to the line supervisor of the requestor or the department head. The line manager then evaluates the purchase requisition further, focusing on the business need, relevance, and urgency of the request. Only those requests that tick these boxes are granted approval. This step adds an operational layer of control. 

4. Procurement review 

This is the step where procurement teams come into the picture. Procurement teams review the approved purchase requisition for clarity, compliance, and completeness. During the procurement review step, item specifications are refined, alternative suggestions are provided, and requests are merged to optimize costs. 

5. Compliance check 

Compliance with regulations and policies is a must for procurement requests. Compliance reviews are carried out by compliance or legal teams that verify adherence to internal policies and external regulations. These checks include verifications for contract obligations, regulatory risks, and supplier eligibility. 

6. Vendor selection 

The sourcing process is initiated by the procurement team either through vendor databases, quotations (RFQs), or tenders. The choice of vendors is based on cost, quality, lead time, and previous performance. Upon choosing the vendor, the linking of the vendor to the appropriate purchase requisition is carried out. 

7. Purchase order creation 

After the chosen vendor is linked to the purchase requisition, the purchase order is generated against the requisition. The purchase order contains all the information in the purchase requisition along with additional information on the number of items, delivery date, etc. The PO confirms the order, delivery timeline, and terms. Once the vendor accepts the purchase order, it becomes a legally binding document. The purchase order is sent to the vendor for audit and tracking. 

8. Final approval and Purchase order release 

Before the purchase order is released to the vendor, the approval workflow routes it through a final approval stage where procurement leadership or finance leadership reviews the PO. The level of approval depends on the PO value. Once the PO is approved, it is sent to the vendor, and the internal copy is stored for procurement audit trail. 

What Ails Manual Procurement Approval?

Manual procurement approval workflows are inefficient and are riddled with delays and bottlenecks. The lack of transparency in the manual procurement authorization process leads to maverick spending, which in turn compromises procurement performance and the bottom line. Added to these shortcomings, manual procurement approval processes, time delays, and bottlenecks are the main issues that plague procurement approval workflows. 

High risk of errors and maverick spending are very common in manual procurement workflows. Errors in manual procurement workflows can range from incorrect data entries to missing approval signatures. The risk of maverick spending is high in manual processes that lack visibility and transparency. 

Best Framework for Procurement Approval Process

Procurement requirements vary in every organization, based on the scope and nature of operations. For seamless procurement operations, organizations require a robust framework for the procurement approval process. Consider this framework for outlining your procurement approval process.                                                            

Culture 

This is the foundation block for your procurement approval process. The success of the procurement function depends largely on the purchase culture being practiced in the organization.

How is purchasing handled in your organization currently?

What are the practices and values in place while making important buying decisions?

The spend culture provides answers to all these questions pertaining to purchasing. Understanding the spend culture is primal to establishing a robust procurement approval process. 

Structure 

Understanding the organizational structure is as important as understanding the spend culture.

How is your team divided into departments and teams?

Is there a dedicated purchasing team or does it fall under the umbrella of finance. The organizational hierarchy within procurement teams will directly influence who the approver will be, and at what stage the approver should be introduced in the workflow. The budget owners within finance or procurement teams will help determine a hierarchy of approvers, who will oversee the entire approval process. 

Stakeholders 

The stakeholders in the procurement approval process are requestors, approvers, and vendors. Requestors are concerned with places a request of goods and services. The approver is concerned with considering and approving the purchase requests submitted by requestors. Vendors could be ones that are already working with your organization, or new suppliers that need to be onboarded for fulfilling the purchase order. 

Policies 

Prior to the issue and approval of purchases, the procurement team needs to have an organizational policy that defines the response to specific scenarios. Commonly encountered scenarios include – budget items, special purchases, monetary thresholds, and vendors. 

Tools 

The topmost tier of the procurement approval framework are the tool/s you will need to carry out the approval process successfully. Here is where you can differentiate your procurement strategy.

Choose AI-based no-code workflow automation tools over clunky, manual tools to manage the procurement process. We have already established the futility of using manual tools in procurement approval processes.

A no-code workflow automation tool like Cflow is all you need to build a robust purchase approval workflow. Cflow is not only fast to deploy, but it comes with an extensive template library, which you can use to build procurement approval workflows within minutes. 

How to Streamline Procurement Approvals?

Moving on to the most interesting part of this blog – streamlining procurement approval workflows. Here are the most effective ways to streamline the procurement approval workflow. 

Map out the process

The first step is to outline and define the approval process you want to automate. Purchase requests, purchase orders, budget authorizations, and invoices are usually processes that require streamlining.

You need to clearly map out – the approval type, stakeholders involved, roles and responsibilities, approval rules, escalation triggers and thresholds, for the approval process. 

Choose a workflow management tool

Mapping out the process gives teams a good idea of the requirements. The tool that is chosen for automation must align with organizational requirements. Research on all available tools that are closely aligned with your requirements.

The tool must also provide key features like automation, alerts and notifications, and customization. Another important feature is that the tool must integrate seamlessly with existing systems. 

Define user roles and permissions 

Efficient approval workflows need to have clearly defined user roles and permissions. You need to assign specific escalation and approval roles to the relevant staff. Before implementing the automation tool, you must set up permissions for the view, edit, and approve functions. The access levels must be based on department or hierarchy. 

Configure automation rules 

Once the roles and permissions are clearly defined, the next step is to leverage the power of automation for assigning tasks, issuing alerts and notifications, and setting approval thresholds.

An AI-based workflow automation tool like Cflow can be easily configured with business rules. Automation can be used in several ways to streamline the approval workflow. Setting task assignments for automatic routing based on the type of request is one of the ways in which can be used to streamline approval workflows. You can also establish escalation criteria in scenarios where approvals are not completed on time. 

Launch the workflow 

Once all the moving parts of the approval workflow have been set, the workflow is ready for deployment. Before deploying the workflow in the entire organization, it is better to test it out. Once deployed, you need to continuously monitor the performance of the workflow by tracking key metrics.

Regular review and adjustment of the process is a must to ensure optimal performance. In addition to monitoring the performance of the workflow, you also need to train your employees so that they can use the workflow efficiently. 

Key Considerations for the Best in-class Procurement Approval Workflow

There are several factors that you need to consider while choosing the procurement workflow automation solution.

So, how do you choose the best-in-class workflow automation software?

Here are the key considerations for the best in-class procurement approval software. 

Complete alignment with organizational structure and policies 

Mapping approval levels to the organizational hierarchy makes sure that the workflow aligns with the reporting hierarchy and structure in the company. Incorporating procurement policies and thresholds into the approval workflow helps maintain compliance and control. 

Involvement and collaboration of stakeholders 

Stakeholders need to be identified for creating an approval workflow. You need to identify requestors, reviewers/approvers, and finance personnel involved in the workflow. Facilitating seamless collaboration among stakeholders is essential for a smooth approval workflow. The approval automation workflow must issue notifications, reminders, and provide centralized document management features. 

Enablement of technology 

Enabling the procurement function by adopting e-procurement solutions can eliminate manual tasks, minimize errors, and improve transparency. When procurement approval workflows are integrated with existing systems, data is seamlessly exchanged between systems. Seamless data collaboration tries to reduce duplication of data and effort. Automation technology enables mobile approvals and real-time approval tracking for making informed decisions on-the-go. 

How to Optimize Procurement Approval Workflows?

Building a procurement approval workflow is not a one-and-done event, you need to continuously optimize and improve upon it to achieve maximum efficiency and productivity. Here are some tested ways to optimize the procurement approval process:

Standardization and simplification

An efficient procurement approval workflow must provide standard approval templates and criteria that ensures consistency and brings clarity among stakeholders. Multi-level procurement approvals are common within enterprises.

Minimizing approval levels and eliminating redundancies can help optimize the process. Also providing clear guidelines and training to the team ensures that everyone is on the same page and understands their roles and responsibilities. 

Continuous monitoring and improvement

Once a procurement approval workflow is established, it is important to track the key performance indicators that throw light on the efficiency of the process. Conducting regular audits helps you identify bottlenecks and take corrective measures before the process goes off track.

As important as it is to track performance, gathering user feedback and improving the process are also equally important. Celebrating successes and sharing best practices encourages continuous improvement. 

Establishing clear roles and responsibilities

Assigning clear roles for each stakeholder in the approval workflow brings accountability within the procurement process. The risk of fraud or errors is also reduced when everyone is clear about their roles. 

Establishing service level agreements

Setting realistic and measurable SLAs for approval cycle times ensures that procurement requests are processed on time. Not just establishing SLAs, they need to be clearly communicated to approvers and stakeholders so that clear expectations are set and performance is tracked. 

Implementing escalation and exception handling procedures

Defining a clear escalation path for scenarios such as delayed or stuck approvals is helpful in preventing bottlenecks. You also need to establish clear conditions for handling exceptions and contingencies. These escalation and exception handling procedures must also designate the personnel who need to implement these procedures. 

Prioritizing data security and privacy

The purchase approval workflow software must implement access controls and authentication mechanisms for protecting sensitive procurement data from unauthorized access and duplication.

It is important to protect sensitive procurement data throughout the approval process to maintain confidentiality and trust. With customers and vendors expecting compliance with regulations and policies, it becomes very important to comply with GDPR and other regulations. Regulatory compliance helps organizations keep legal and reputational risks at bay.  

Automation of repetitive tasks in the procurement approval workflow is one of the most effective ways to optimize the process. The manual effort required for follow up of request statuses is eliminated through automation. Automation also eliminates the inherent bottlenecks in manual processes and enhances the visibility and transparency throughout the approval workflow. 

Advantages of Automating the Procurement Approval Process

Although setting up a procurement approval workflow may seem a daunting and time-consuming proposition, it provides teams with benefits that outweigh the effort involved. The key advantages of automating the procurement approval process are –

Improves accuracy

Streamlining approval workflows improves the overall accuracy of the process. Automated workflows allow you to eliminate data errors, compliance issues, and avoid duplication of effort. 

Saves time

Obtaining purchase approval at the beginning of a project saves time by facilitating organizational alignment. When the contract is approved on time, it prevents confusion and future complications that could lead to the termination of contracts or legal issues. 

Improves efficiency

Another significant advantage of automating the purchase approval process is the improvement of overall process efficiency. Automation standardizes the entire workflow, thereby eliminating confusion or chaos in the process flow. 

Faster turnaround times

Automation ensures that requests are reviewed and approved on time. Workflow software like Cflow issues automated alerts and notifications to key stakeholders, keeping them informed on the status of the requests and on pending reviews or approvals at their end. 

Deeper visibility

With automation, you will have full view of the approval process at all times and will be able to easily see the history of all the actions taken on the request. Deeper visibility into the trail of the request helps managers spot bottlenecks and resolve them immediately. Real-time visibility enables managers to see exactly where something is getting stuck and avoid waiting around for updates. 

More individual accountability

Automation assigns roles and responsibilities clearly to all stakeholders so that they are sure of what is expected of them. Armed with this clarity, individual approvers are clear about their responsibilities and are accountable for their actions. 

Real-time reporting and analytics

Centralized access to procurement data helps create real-time reports on spend. This data can be also used for analytics of the procurement function. All important information, such as invoices, receipts, subsidiary data, and reports, is centrally stored for easy access. 

Improved compliance

Streamlined approval workflows help ensure compliance with regulations and policies. Adherence to data policies and regulations keeps legal issues at bay. Automated workflows provide absolute transparency of procurement approval processes, which ensures that all stakeholders are on the same page. Vendor contracts are also managed efficiently, and compliance with contract terms is ensured in automated workflows. 

Automating Procurement Approval with Cflow

An AI-powered workflow platform like Cflow is the best choice for automating the procurement approval process. With several success stories in automating end-to-end procurement workflows, Cflow stands out among other workflow solutions.

The G2 Review validation as the “High Performer for Spring 2025” stands testimony to the efficiency of Cflow in automating key business workflows. 

Key features of Cflow include – 

• Drag and drop form builder powered by AI – Build workflows for key business processes within minutes.
• Automated routing and notifications – Never miss approval of requests with Cflow.
• Extreme customization – Create tailor-made workflows for your processes.
• Rules engine – Simple, one-click workflows for approving pending requests. 
• Reports and analytics – Glance through all the data related to workflows.
• Link multiple workflows – Seamless integration ensures smooth processing
• Agile Kanban – Prioritize tasks more efficiently than ever
• OCR data extraction – Simplify text reading and extraction 

Cflow has helped several organizations that had procurement operations at their core to simplify and streamline their operations. From Educational Institutions to healthcare equipment manufacturers to non-profit organizations, Cflow has helped automate key procurement approval processes in these organizations.

Conclusion

A well-defined structure in the procurement approval process is a must for hitch-free operations. This cannot be achieved without the proper automation tools. Creating a digital approval workflow for procurement requires advanced workflow solutions like Cflow.

With an AI-powered workflow solution like Cflow, procurement managers can handle multi-level procurement approvals, vendor approval workflow, or purchase order approval process with utmost ease.

The no-code approach that Cflow follows towards process automation makes it the preferred solution for overcoming challenges posed by manual procurement processes. Ready to try out Cflow? Sign up for the free trial now!

FAQs

Are procurement approvals the same as purchase approvals?

Yes. Both procurement approvals and purchase approvals refer to the same procurement operation. 

Is no code the preferred approach to procurement approval automation?

Absolutely! Key procurement approval workflows can be effectively automated with no-code workflow solutions. 

Can multi-level procurement approvals be automated?

Yes, when a no-code workflow solution like Cflow is used to automate workflows, even multi-level procurement approvals can be automated.

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