Financial controls are essential for any organisation and pre-purchase authorisation is key to effective purchase-to-pay management.
As people throughout your various departments and functions spend money on behalf of your organisation, you want to know that those expenditures are being reviewed and authorised by the right people before they are committed.
While you don’t want to burden employees with excessive controls for low-value goods like office supplies, you do want to know that multiple levels of management have seen and authorised major expenditures.
Most purchases lie somewhere in between the extremes and should have some level of authorisation. Certainly, you want managers to have the opportunity to approve any significant purchase within their department in order to effectively manage their budgets.
- Budget control: Without proper authorisation controls, employees may buy things that are not budgeted, not a current priority, or not appropriate for their function.
- Quality and risk control: For some types of purchases, such as capital equipment, computer hardware and specialised outside services, the involvement of an expert that understands technical, legal or other category-specific issues beyond the requesting employee, may be needed to ensure the right purchase is made.
- Fraud prevention: Though the vast majority of purchases are well intentioned, there is always the risk of fraudulent buying – something you certainly want to prevent.