Who Approved That? Why Purchasing Approval Authority Matters

By Rosita Johnson

Clear spending limits and approval responsibilities help prevent unauthorized purchases, without slowing down operations.

Imagine reviewing your company's monthly expenses and discovering a $15,000 equipment purchase that nobody in management remembers approving. The equipment was needed, the price was reasonable, and the employee who ordered it was simply trying to keep the operation running. So, what is the problem?

The purchase may have been necessary, but the employee may not have had the authority to approve it.

Purchasing approval authority defines who can authorize company spending, the limits of that authority, and when additional approval is required. When those rules are unclear, even a necessary purchase at a fair price can create a financial control problem.

Perhaps the department manager thought the purchasing team was responsible for approving the expense, while the buyer assumed the manager had already authorized it. The vendor received the order, delivered the equipment, and sent the invoice. Now accounting is trying to determine who approved the purchase and which budget should cover it.

Situations like this are not necessarily the result of someone deliberately ignoring company policies. Sometimes the policies do not exist, are outdated, or have not been communicated to the people responsible for purchasing goods and services.

With more than 25 years of experience supporting procurement, contracting, and supply chain operations, ASCI understands the importance of clearly defined purchasing responsibilities. One of the most important questions in the process is also one of the simplest: Who has the authority to spend the company's money?

Requesting, Approving, and Purchasing Are Different Responsibilities

One common misunderstanding in procurement is the difference between requesting, approving, and purchasing goods or services. These are separate responsibilities, and depending on the size and structure of the company, they may belong to different people.

For example, a maintenance supervisor identifies a need for replacement parts and submits a purchase request. A department manager with the appropriate approval authority confirms that the materials are necessary and the expense is within the approved budget. The buyer then sources the materials, negotiates pricing, and issues the purchase order to the selected vendor.

But what happens if the maintenance supervisor skips the process and contacts the vendor directly? Or if the buyer receives a request from a project manager and assumes that the manager has sufficient spending authority?

The purchase may be legitimate, but that does not necessarily mean it was properly authorized.

A delegation of authority (DOA) matrix, also called an approval authority matrix, helps make these responsibilities clear. It establishes who can approve expenditures, the dollar limits associated with their positions, and when additional approval is required.

Setting Purchasing Approval Limits

Not every purchase needs to go through the company president or CFO. Requiring senior management to approve every small purchase can create unnecessary delays, especially for companies with multiple locations or operations that run around the clock.

A well-structured approval process gives employees enough authority to perform their jobs while maintaining appropriate financial oversight. For example, a company might establish the following limits:

Role	Illustrative approval limit
Supervisor	Up to $1,000
Department manager	Up to $5,000
Director	Up to $25,000
Executive management	Above $25,000

These limits are examples, not recommendations for every business. Actual limits should reflect the company's size, operating budget, organizational structure, and types of purchases. A $10,000 purchase might be routine for a large oil and gas operation but have a significant financial impact on a small business.

The policy should also explain whether approval limits apply to individual purchases, total contract value, or cumulative purchases over a defined period. Without clear rules, someone could split a $12,000 purchase into three $4,000 orders to stay below an approval limit. Even if the intention is simply to get materials ordered faster, splitting purchases to avoid required approval defeats the purpose of spending controls.

When an Urgent Purchase Becomes a Budget Surprise

Anyone who has worked in operations or project management knows that not every purchase can be planned months in advance. Equipment breaks down, critical parts fail, and project schedules change. Sometimes a decision needs to be made quickly to avoid downtime or additional expenses.

Through its procurement and expediting work, ASCI understands how critical delivery dates can be to ongoing operations and major projects. However, urgency should not automatically eliminate purchasing controls.

Let's say a construction foreman needs a replacement component immediately to avoid delaying a project. The foreman contacts a supplier, confirms availability, and authorizes a $20,000 purchase. The part arrives the next day, and the project continues without interruption.

Sounds like a successful outcome, right?

Not necessarily. What if the foreman only had $2,500 in purchasing authority? What if the procurement team had already ordered the same component? What if the project budget did not have another $20,000 available?

The purchase may create an unauthorized commitment, duplicate materials, or an unexpected budget overrun.

This does not mean employees should wait several days for approval while equipment sits idle. Emergency purchasing procedures should identify who can authorize urgent expenditures, how approvals can be obtained after hours, and what documentation is required afterward.

The objective is to maintain control without preventing employees from doing their jobs.

Who Is Responsible When Something Goes Wrong?

Unclear spending authority also makes accountability difficult. Department managers may be responsible for their budgets but unaware of purchases until invoices arrive, sometimes weeks after commitments were made. By then, opportunities to negotiate pricing, cancel an order, or find another supplier may be limited.

Service contracts present another risk. An employee may be authorized to request routine maintenance but not to approve a new annual service agreement. Without a clear distinction, the company may face a commitment that exceeds the employee's authority.

Approval rules should therefore address more than purchase orders. They should cover service agreements, contract amendments, change orders, purchasing cards, and other financial commitments.

Businesses should also define how employee expenses are approved and avoid self-approval. Separating requesting, approving, and processing responsibilities is an important internal control known as segregation of duties.

For smaller companies, separating every responsibility may not be practical. There may be only one person handling purchasing and another handling accounting. Even then, a business owner or manager can provide oversight by reviewing purchases, approving expenses above defined thresholds, and periodically checking transactions against company policy.

Documenting Your Delegation of Authority Matrix

An approval matrix is a good start, but it will not accomplish much if employees do not know it exists or cannot easily access it.

The purchasing policy should explain who can request purchases, who can approve them, what dollar limits apply, and how exceptions are handled. It should also specify what documentation is required before an order is placed.

Where an ERP or purchasing system supports approval workflows, requests can be routed based on dollar value, department, project, or other criteria. This can reduce manual follow-up and provide an electronic record of approvals.

Smaller businesses may not have this functionality, and that is fine. A documented procedure, an accessible approval matrix, and a consistent method for retaining email authorizations can still support effective oversight.

Approval authority also needs to change when employees move into different roles or leave the company. Review the matrix alongside system access, purchasing cards, and vendor accounts so that old permissions do not remain in place.

Review approval limits and authorization procedures periodically, especially during growth, organizational changes, or new project activity.

How to Review Your Purchasing Approval Process

Too many approval requirements can be as problematic as too few. If employees need four signatures to purchase a $200 item, the administrative effort may outweigh the benefit. The challenge is balancing financial control with operational efficiency.

Start by comparing your written policies with how purchases are actually made. Ask:

• Are purchasing approval limits documented and accessible?

• Can employees distinguish a purchase request from authorization to spend?

• Are emergency and after-hours approval procedures defined?

• Do approval rules address total contract value, amendments, and change orders?

• Are purchasing permissions updated when employees change roles or leave?

• Does accounting have visibility into committed spending before invoices arrive?

• Are employees following the established procedures?

If those answers are unclear, the issue may extend beyond spending authority. Missing approvals can point to gaps in purchasing procedures, documentation, system workflows, and accountability.

Take a Structured Look at Your Procurement Controls

ASCI's Procurement Process Auditor is a self-guided, AI-powered procurement audit kit designed to help businesses examine their source-to-pay processes—from sourcing and contracting through purchasing, receiving, invoicing, and payment.

The Auditor produces a procurement maturity scorecard, a process walkthrough, a document gap analysis, a savings estimate, and reports for the working team and leadership. The process walkthrough helps document how purchasing actually happens, while the document gap analysis examines the policies and procedures you provide for missing or inconsistent guidance.

Together, these outputs provide a structured starting point for examining the kinds of approval and accountability gaps discussed in this article and deciding where to focus improvement efforts.

See what a structured procurement review can uncover. Explore ASCI's Procurement Process Auditor and request the sample report bundle to see examples of the reports before purchasing.

A purchasing process does not need to be complicated to be effective. Employees should understand what they are authorized to purchase, managers should know what expenses they are approving, and accounting should not be surprised when the invoice arrives.

After all, “Who approved that?” is a question you want answered before the purchase is made, not after the bill shows up.

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ASCI specializes in helping businesses to address supply chain management challenges. Visit our website to learn more and to arrange for a free consultation.