Understand how the purchasing validation circuit works

The purchasing validation circuit is a process which enables a document or information to be circulated for approval by a superior, or by one or more collaborators, with a view to its total and final validation. From issuing a requirement to invoicing, purchasing is an integral part of your business. From the expression of need to the chosen method of payment, they require the involvement of several players. Understanding how your company spends money is just as important as understanding how revenue is generated. Approval is the step that certifies the conformity of your purchasing process. Once an offer has been selected, with or without negotiation, it must be submitted to one or more decision-makers for approval.

Even before learning how to set up a purchasing validation circuit within your company, it’s important to understand how this type of process works and what its various stages are.

1 – What is purchasing approval?

A formal process defined within a company, purchasing approval is the stage at which approval is given to initiate an order for the purchase of goods or services. It is granted by one or more employees and varies according to the size of the department or its organization.

It is also referred to as pre-approval of expenditure. This internal process approach applies to all your purchasing activities, and can be adapted to your company’s needs.

The aim is to guarantee the traceability of all your flows and ensure visibility in your operations. Your commitments are compliant and purchasing risk reduced. Confidence does not exclude control, which is why an adapted validation circuit benefits your company.

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2 – How does the validation circuit work?

The purchase requisition is sent up

This is the first step in a good validation circuit. Essential, purchase requisitions enable your employees to express their needs in detail. These are documents in the form of quick specifications in which the main information, such as description, date of need or department concerned, is issued.

These approval requests establish proactive controls upstream of expenditure. This is preferable to validating invoices where the expense has already been incurred.

Our advice: It’s possible for several employees to have a similar need. In such cases, pooling purchasing enables you to centralize their requests into a single order. You’ll gain in efficiency and productivity!

Approvers are identified

The approval chain refers to all the parties involved in approving expenditure commitments. Made up of decision-makers, this chain can vary according to the purchasing family, amount or department concerned.

Generally speaking, the higher the amount, the larger the list of decision-makers. The approval structure initially revolves around a department head. If the expenditure involves a certain amount, the purchasing assessment may also involve the finance department or the signature of the company’s managing director.

Using a digitized purchasing process, the approval stages are automated, and purchase requests are automatically routed to those responsible for approving or rejecting the request. Better than an oral or e-mail validation, the transmission of information and traceability are assured, making your management more efficient.

Our advice: It’s a good idea to include the purchasing department in the list of approvals to check that supplier agreements and contracts are being respected.

Agreed levels

Improving your process means better management of approval parameters. For example, each approval level is defined by spending thresholds. The criteria differ from company to company: the reason, the type of purchase, the establishment or department… It’s up to management to define these different authorization levels and approval conditions.

Your approval flows must also take account of exceptional situations, such as the absence of an employee responsible for validation. In such cases, your system needs to be agile, and assessment must be automatically delegated to another user.

Did you know? 49% of professionals say that the biggest obstacle to their productivity is waiting for their colleagues to act.

Optimized, traced processing

Saving time is a real added value of the approval process. If you don’t have to chase after your staff for approval, you can focus your energy on other tasks! Set up a notification mode adapted to your structure for pending approvals.

Make sure that every purchase requisition includes the exact date of need. Precise deadlines optimize your process and review the procedure for your employees and suppliers.

Last but not least, it’s important to keep track of the actions carried out on a file. In fact, the object enables you to find the users interested in the purchase, and to check the conformity and application of your organizational systems.

In the event of an audit, traceability of purchases enables you to check that a process has been properly implemented, or to trace a reliable audit trail (PAF) to justify the conformity of a purchase. It’s also useful in the event of a dispute, as you can retrace the entire purchasing circuit and analyze any shortcomings.

Whether you use management software, Excel or e-mail, you need to retain access to the documents used and conveyed, so that the elements of the file are centralized.

In conclusion, it’s important to understand how a purchasing approval process works and why it’s useful for a company. Purchasing approval is a step in the purchasing process which is an upstream control that commits the order. The main objectives of an approval circuit are to transmit purchase requests, to identify the approvers/actors in the process, to define authorization levels based on spending thresholds, and finally to optimize and trace all processing. Spend management starts with proper purchasing approval! Find out how to set up an optimized purchasing approval circuit.


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