What is a PO Approval Process
The PO approval process is a systematic way of approving purchase orders. In many cases, businesses integrate this process with procurement software. While the approval process may add some extra steps to the purchasing process, it is an essential tool for safeguarding company resources.
By setting up well-defined approval rules, businesses can guarantee that their employees make purchasing decisions aligned with the company's optimal interests, with the assistance of efficient purchasing software. In certain instances, an approval hierarchy is implemented, involving multiple approvers who review the purchase order at various stages before giving approval for payment. This approval workflow establishes a system of checks and balances that effectively minimizes errors and detects any discrepancies.
The Benefits of a PO Approval Process
Let's look at the benefits:
- Enables tracking of purchase history
- Ensures the correct approver properly authorizes all purchases
- Ensures all POs meet predetermined criteria
- It saves your team time and money
- Minimizes errors and discrepancy
- Prevents fraud and waste by creating a paper or digital trail
- It helps you identify your best supplier
The Steps in a Purchase Order Approval Process
Approving a purchase order can be complicated, but setting these steps in automation, such as integrating them in your procurement software, can help you avoid delays and disruptions in the supply chain.
- Step 1: A purchasing officer creates the purchase requisition, a document requesting to purchase goods or services.
- Step 2: A manager or supervisor approves the requisition.
- Step 3: A purchase order is created and presented to the supplier.
- Step 4: Supplier or vendor responds with an invoice
- Step 5: The buyer receives delivered goods, matches the items against the PO and invoice, and addresses any discrepancies.
- Step 6: The buyer processes the invoice
- Step 7: Match and process the invoice. This step involves verifying that all of the information on the invoice is correct and then issuing payment to the vendor.
