Approval workflows are an essential part of any organization’s procurement process. They help ensure purchases adhere to policies, comply with regulations, and align with budgets and plans. As organizations implement e-sourcing tools and digitize processes, understanding approval workflows is key to maximizing the value of these solutions. This article will explore several things organizations should know regarding implementing and managing approval workflows.
- Defining approval workflows
An approval workflow sets out the steps required for a purchase requisition or contract to be approved. It specifies who needs to sign off on what based on parameters like spend thresholds, product categories, geographic regions, etc. Approval workflows establish accountability and oversight over spending.
Well-designed approval workflows balance empowering requesters with instituting appropriate checks and balances. The goal is to streamline routine purchases while applying extra scrutiny to high-risk transactions. Approval workflows that are too complex or onerous slow down procurement. Overly simplistic ones fail to enforce compliance and policy.
Crafting approval workflows requires analyzing spend data, understanding organizational hierarchies, and mapping out purchasing scenarios. This upfront work enables workflows to route transactions to the right people based on logic and risk factors.
- Automating approval workflows
Manual approval workflows rely on requesters emailing managers, who approve by replying to the email. This is inefficient for all parties. Automated workflows within e-sourcing tools drastically improve the experience.
Automated workflows present approvers with a simple online interface for reviewing and approving transactions. Approvers can handle requests no matter where they are via mobile apps. Requesters receive automatic notifications when approvals are granted or denied, rather than waiting on email replies.
Automated workflows also reduce human errors like documents getting lost or sitting in someone’s inbox for too long. They enforce approvals happening in the right sequence rather than relying on requesters to manually route them. Workflows in e-sourcing tools integrate with back-end ERP and accounting systems, ensuring efficient processing after approval.
- Managing approval hierarchies
Well-defined approval hierarchies are essential for efficient workflows. Hierarchies determine who can approve what based on their position, spending authority, and jurisdiction over certain categories or regions.
Hierarchies should balance empowering managers while retaining appropriate oversight. For example, requiring every purchase to go to the CFO for approval creates a huge bottleneck. On the flipside, letting managers approve unlimited purchases risks compliance issues.
Organizations can define flexible hierarchies where department heads have authority up to certain thresholds but must then get executive approval. Category managers oversee related spending. Location managers handle local transactions.
Maintaining clean organizational charts and cost-center structures ensures requisitions and contracts route properly up the hierarchy during approval workflows.
- Setting up user permissions and access
E-sourcing tools rely on advanced user permission settings to administer approval workflows and hierarchies. Centrally defining user profiles and access rights enables configuring workflows to route transactions to the right people.
For example, a manager’s profile may grant authority to approve purchases under $50,000 in the operations division. A category manager profile has authority over marketing software purchases company-wide.
Setting up groups and permission schemes rather than individually assigning access rights saves significant administrative effort as the organization scales. Permission settings can map to reporting hierarchies and cost center structures to streamline workflow routing.
- Enforcing approval policies
Approval workflows gain their value from consistent enforcement of routing rules and compliance policies. Requiring approval happens through a combination of system permissions and user discipline.
E-sourcing tools can institute approval requirements at the point of requisition creation. For example, trying to submit a purchase order over certain limits without proper authority triggers an error. The system only allows properly approved transactions to proceed.
However, users may still try to bypass the rules, for example, by splitting purchases into multiple smaller orders. Here, training and culture are important to ensure employees understand and respect the value of unified workflows.
Leaders should empower procurement teams to thoroughly audit transactions and enforce compliance through approvals. Approvers who wrongly authorize non-compliant purchases should be retrained or disciplined if necessary.
- Monitoring and optimizing workflows
Approval workflows function best when continually monitored and optimized. Analytics from e-sourcing tools can identify bottlenecks that slow down transaction approvals. Are certain managers overwhelmed by volume? Are staff frequently out of office with no delegation or backup?
Data can also reveal spots where additional approvals may be warranted based on spend anomalies, policy violations, or emerging risk factors. For example, a spike in gift card purchases may prompt adding a reviewer for certain transactions.
Analysis of historical spend data and approval patterns allows for continually fine-tuning routing rules and hierarchies. As the organization evolves, workflows must evolve to balance oversight with efficiency.
- Leveraging digital workflows
Transitioning from paper-based to digital approval workflows provides many benefits beyond basic automation. Digital workflows enable both rich data capture and deeper data integration.
Requesters can provide information like budget codes, cost center allocations, and projected usage directly on purchase requisition forms. Workflows then automatically validate this data against ERP systems to ensure accuracy and policy compliance.
As approvals are completed, digital tools create an audit trail linking back to underlying records like contracts or invoices. This end-to-end digital chain provides transparency and simplifies reporting.
Finally, digital forms allow attaching documents, screenshots, or reference materials to the workflow. Approvers have all the supporting information at their fingertips when reviewing requests.
- Using workflows to track renewals
Many procurement teams are faced with the difficulty of ensuring contractual renewals are properly tracked and approved. When you have no insight into upcoming renewals, you will have to deal with auto-renewals that may be expensive or service disruptions owing to lapsed contracts.
The approval workflows will give renewal oversight upon the first setting up of the contracts. These terms, like key renewal terms, can be configured to automatically trigger approval workflows when renewal deadlines are approaching.
Workflows route the next renewals to the ones who are right to validate the need, assess performance, and determine the best renewal strategy. Integrations with contract repositories provide approvers with key information like spend and usage history.
Conclusion
The approval workflows are the foundation block of e-procurement and e sourcing tools implementations. The implementation of such rules and regulations should always be well-designed and strictly adhered to, as they help in accountability and compliance without affecting productivity. Organizations must invest in the requirements, automate the workflows, apply rules, and keep the hierarchies. Continuous assessment and improvement ensures that governance workflows provide risk mitigation and efficiencies.