The Approval Chain
Ensure you do actually have a Purchase Order Approval Chain Strategy in the first place.
Sounds simple right ? But is it ? Well if you are say no more than maybe a 20 person company with one person placing the orders then yes it probably is very simple. You run into the boss’s office and simply say ‘Hey is this OK to order ? ; he says yes or no and you are done.
But imagine you are a 100 person business or a 1,000 or 10,000+ person business – then its not so easy and if it is then watch out as procurement fraud is likely running rampant.
You might be a purchasing manager with buyers who report to you. You might have different lines of business’s each with a different operating budget against different categories of purchase.
You can’t go running into “The Boss’s office” then ! You’d probably get fired on the spot and that’s a fairly big break in the management chain right there !
So what to do ? Well don’t worry as fortunately for you we have already not only thought about it but have implemented solutions to resolve it – no matter what size business you have.
Find the right management tool to implement the Strategy
If you are a largish firm you will have an audit and or compliance department (refer to our vendor risk management section) – and to that point if you haven’t heard of Sarbanes-Oxley and you are a public (or large private) company then you better get Googling fast on that subject. So what do we mean by finding the right management tool well we don’t mean a Spreadsheet that keeps track of who in the business can sign up to what level on what commodity or line of biz, no we mean a real management tool, a workflow subset of your professional procurement package. You do have one of those right ?
So assuming you do have some form of purchase order software system in place you then need to start making sure it at least address’s the required criteria as follows,
Automated Approvals Intelligence
Will your PO Approvals system understand
- The management hierarchy in your HR system
- Understands who reports to whom
- Job function
- If they have signing ability
- If they do is it sole, joint, part of a team
- Area of business responsibility
In other words, will your purchase order approvals process be able to differentiates between areas of business responsibility they both can and cannot sign against ; in other words – Do you want a manager who is in charge of say your new bridge building project to also sign off against the highway construction project ?
Different projects right ? So probably this manager has different functional and financial responsibilities – your approvals system needs to reflect this and more !
But what ‘more’ could we be referring to ? Well for example … what about a sanity check ? A sort of ‘does this purchase make sense‘ check ?
Its not the ‘financial approval’ which is the “Can we afford it?” sign-off .. no, its more the “Do we actually really need this ?” sign off.
These types of checks are more sort of ‘Approval oversight’ don’t think you need it ?
Think again and then when you’re done with thinking about it do something about it Contact us at Eyvo for an explanation of how we can fix all those challenges in your approvals process.