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Approval process: definition and important aspects for buyers
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Approval process in a nutshell:
An approval process is a systematic procedure in which procurement processes must be checked and approved by authorized persons according to defined criteria. For purchasing, this is an essential control instrument that ensures compliance and minimizes financial risks through the dual control principle.
Example: In a medium-sized company, orders over EUR 10,000 go through a three-stage approval process: first by the head of department (within 24 hours), then by the purchasing manager (within 48 hours) and finally by the management (within 72 hours) before the order can be triggered.
Contents
What is the approval process?
The approval process in purchasing is a central control instrument that ensures that all procurement transactions are checked and authorized before they are carried out. This process ensures that orders and contracts comply with company guidelines, budget requirements and compliance. Defined approval steps create transparency and minimize the risk of wrong decisions.
Core components of the approval process
Importance of the approval process in purchasing
In procurement management, the approval process is a key tool for ensuring compliance and cost control. The review and approval of orders ensures that expenditure is in line with the company's strategic objectives. The process also enables the efficient allocation of resources and minimizes risk management.
Approval process: from manual checks to automated workflows
The approval process is a central component of purchasing, which is based on the theoretical principles of process costs and approval of procurement transactions. In practice, it ensures that all order costs comply with internal guidelines and that financial risks are minimized. However, traditional methods are reaching their limits in terms of efficiency and transparency. There is therefore a growing need for a transformation towards modern, digital approaches.
Old: Manual release processes
Traditional approach: In traditional companies, the approval process was usually manual. Purchase requisitions were created on paper or by email and had to be signed by supervisors or approved by reply. This process was time-consuming and error-prone as it depended on human intervention and was often confusing. Tracking approvals was difficult as there was no centralized documentation. There was also an increased risk of unauthorized orders and budget overruns due to the lack of automatic control mechanisms. This resulted in inefficient processes, delays and a lack of transparency in the procurement process.
New: Automated approval workflows
Approval workflows: Modern approval processes rely on automated workflows within digital systems. By implementing specialized software solutions or ERP modules, approvals are processed electronically and in real time. Key innovations such as predefined approval guidelines, automatic notifications and mobile approval options significantly increase efficiency. Practical benefits include shorter processing times, increased transparency and a reduction in human error. The integration of budgeting and compliance checks into the workflow also ensures compliance with internal and external requirements. Overall, this modern approach leads to leaner processes, cost savings and an improved basis for decision-making.
Practical example: Implementation at TechSolutions GmbH
TechSolutions GmbH has successfully digitalized its approval process by introducing an automated approval workflow system. Before the changeover, it took an average of 48 hours to approve an order. After implementation, the time was reduced to 8 hours, which corresponds to an improvement of 83%. Transparency in the process has been significantly increased, as all approval steps are now documented in the system in a traceable manner. In addition, the number of process errors was reduced by 70%. Automated budget monitoring has completely eliminated budget overruns, resulting in annual cost savings of around 150,000 euros.
Conclusion on the approval process
The approval process is an indispensable control instrument in modern purchasing. It ensures adherence to compliance requirements and effective cost control through structured processes, clear responsibilities and digital workflows. The success of the process depends largely on the balance between thorough checking and process speed. With the use of modern technologies and continuous optimization, the approval process is constantly evolving and thus remains a key element in strategic purchasing management.
