Automating Purchase Orders and Approvals
· by Panayot Dimkov
To automate purchase orders, you have to separate two processes that usually get mixed up: the purchase order, which exists so that what is needed arrives, and the purchase approval workflow, which exists to control spending before it is committed. Automating the first without the second speeds up buying and loses control; automating the second without the first adds bureaucracy and saves nothing. What works is a short request form, an approval matrix by amount — automatic below a threshold, routed to the right person above it — and orders issued and followed up without manual work.
1The informal order
Many companies have a written purchasing process and a real one. The real one usually starts with an email or a phone call to the supplier and ends with someone in admin regularising it weeks later.
| Consequence | Why it hurts |
|---|---|
| No prior spend control | Approval arrives once the commitment already exists. At that point, approving is a formality |
| The invoice matches nothing | With no order, automatic invoice matching is impossible and everything goes through manual review |
| Committed spend is unknown | Available budget is an estimate, because what is ordered and not yet received is missing |
| You buy worse | Without visibility there is no aggregated volume and no negotiation. You pay the urgency price |
2How to automate purchase orders: the full workflow
A well-built purchase order process has five stages, and only one of them is approval.
Stage 4 is often one of the most profitable and one of the least requested. Nobody has "chase the supplier" in their job description, but somebody does it every day.
3Designing the approval matrix
It looks administrative and it actually decides whether the system gets used or bypassed. Three criteria are enough for almost any small or mid-sized company.
- By amount. With a threshold below which no human approval is needed. Setting it high feels risky, but a low threshold produces hundreds of de facto automatic approvals: people approve without looking.
- By category. Office supplies and subcontracting should not follow the same path even when they cost the same.
- By cost centre. Whoever answers for the budget should see the commitment, even if they are not the one signing.
And four mistakes that keep recurring:
4And the orders you receive
The other side of the counter has the same problem in reverse: customer orders arriving by email, each in its own format, with someone typing them into the ERP.
The workflow is symmetrical: extract the lines from the message or the attachment, validate references and prices against the catalogue, create the order as a draft and let a person confirm. When the customer is recurring and the format stable, the hit rate tends to be high and confirmation is a glance. We cover it in more detail in automating email and incident handling.
5What to measure
Four indicators are enough. Measure them before automating so you have something to compare against: it is the baseline we explain in how to calculate process automation ROI.
| Indicator | What it reveals |
|---|---|
| Days from request to order issued | The central indicator. Above two, people are likely to buy on their own |
| Share of purchases with no prior order | Measures the informal process. It should fall; if it does not, the official route is still worse than the shortcut |
| Requests approved automatically | Shows whether the threshold is right. Too low and everyone approves without looking |
| Orders received late | Justifies automatic follow-up and lets you assess suppliers with data |
Frequently asked questions
Can I build the approval workflow outside the ERP?
Yes, and in many cases that is the sensible option. If the ERP's purchasing module is rigid or expensive in licences, the request and approval flow can live in an automation tool and create the order in the ERP only once approved. What matters is not ending up with two truths: the definitive order must exist in one place.
What automatic approval threshold is reasonable?
It depends on purchasing volume and each company's risk appetite, so there is no universal figure. The useful criterion is different: if the cost of reviewing a request exceeds the risk of not reviewing it, the threshold is too low. Reviewing 50-euro purchases one by one usually costs more in management time than what is at stake.
How do I stop people buying on their own?
By making the official route faster than the shortcut, not by banning the shortcut. A two-minute form with automatic approval below the threshold and the order issued the same day competes well. A three-signature, five-day process competes with nothing.
Can orders be approved from a phone?
Yes, and it is one of the things that most changes adoption. The approval has to arrive as a notification with everything needed to decide — amount, supplier, item, remaining budget — and be resolved with one tap. If it forces someone to open an application and search, the delay comes back.
What if my suppliers do not accept electronic orders?
They do not need to accept any special format. The flow can generate the order as a PDF and send it by email, which is what you already do by hand. The gain is that it is generated automatically, numbered automatically and logged — not the channel it travels through.
In short
These are two processes: ordering and approving. The system works when ordering is faster through the official route than through the shortcut, and when approving can be done from wherever the person is, with the information in front of them.
The stages that usually pay back most are not approval but issuing and follow-up: generating the order, sending it and chasing deadlines are purely repetitive tasks. And once the order exists in the system, the matching invoice can approve itself. That is how we approach AI process automation.
How many purchases happen with no order in your company?
It is the figure that best describes the state of the process. We review the request, approval and issuing workflow with you and tell you which stage to automate first.
Request a process analysisNexum Blog
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