How to automate purchase order and expense approvals
By Keith Hamilton · · 4 min read
Approvals are one of the quieter drains on a small business, and purchase order approval automation is one of the most direct ways to stop it. A purchase request sits in someone's inbox for a week, a receipt is lost in a coat pocket, and a finance person spends the end of each month chasing managers to sign off expense claims. This guide explains how automating purchase order and expense approvals works, how to keep sensible controls in place, and where a person should still decide.
What does the approval process look like today?
In many firms, approvals run on email and goodwill. Someone asks for permission to buy something, a manager replies "fine", and the purchase goes ahead. Expenses are collected on a spreadsheet, with receipts photographed or stapled to a form, and checked line by line.
The work itself is not difficult. The cost comes from:
- Chasing people for decisions they could make in seconds.
- Checking the same things every time, such as whether a receipt is attached and whether the amount is within policy.
- Re-keying approved purchases and claims into the accounts.
- Finding out about spending only after it has happened.
How does purchase order approval automation work?
It routes each request to the right approver by rule, gets a decision in one click and stores the approved order so it can be matched to the invoice. A purchase order is a request to spend, approved before the money goes out. Automating it means:
- A simple request form. The requester gives the supplier, what is being bought, the amount and the budget or cost centre.
- Routing by rule. The request goes to the right approver based on rules you set, such as the amount, the department or whether the supplier is new.
- Approval in one click. The approver sees the request with the key details and approves or declines, by email or on their phone.
- A record that follows through. Once approved, the purchase order is stored where it can be matched to the invoice later.
That last step links to invoice handling. When you raise purchase orders, matching supplier invoices against them becomes much easier, which our guide to automating invoice processing covers.
How do you automate expense claims?
An automated expense approval workflow captures the receipt, checks it against your policy, sends it for approval and posts it to the accounts. It follows the same pattern as purchase orders, but starts with the receipt:
- Expense receipt capture. Staff photograph the receipt or forward an email receipt. The tool reads the date, supplier, amount and VAT.
- Policy checks. Each line is checked against your rules: within the limit for its category, a receipt attached, not already claimed.
- Approval. Claims that pass go to the manager. Claims that break a rule are flagged with the reason.
- Posting. Approved claims are sent to the accounts and queued for reimbursement.
The checks in step two are where the time goes today. They are also the most rule-based part of the process, which makes them the natural place to automate first.
What spend approval rules should you set?
Set a few clear spend approval rules that describe how your business already works. For example:
- Purchases below a set amount from approved suppliers need the budget holder only.
- Above that amount, a director also approves.
- A new supplier always needs a second check.
- Expense claims over the category limit go to finance with a note.
When the rules are complicated, people work around them by email, and the process stops being followed. Start simple and add a rule only when there is a clear reason.
Where should a person still decide?
A person decides anything outside the rules, anything involving a new supplier or bank details, and anything that looks odd. Automation applies your rules consistently, but it does not make judgement calls on its own. Keep a person involved for:
- Anything outside the rules, such as an unusual purchase or a claim with a missing receipt.
- New suppliers, and especially any change to a supplier's bank details, which must always be confirmed through a separate, known contact route.
- Patterns that look odd, such as several claims just under a limit.
A good set-up shows why each item was flagged and records who approved what and when. That record also answers your accountant's questions at year end.
How much time does approval automation save?
The saving is the time spent checking and chasing, valued at a loaded hourly cost. Here is the calculation for a finance assistant who spends 5 hours a week checking expense claims and chasing approvals, plus managers who spend another 2 hours between them:
- Finance time: 5 hours at a loaded cost of £20 is £100 a week.
- Manager time: 2 hours at a loaded cost of £35 is £70 a week.
- Total: £170 a week, or about £8,800 a year.
Automating half of that time releases about £4,400 a year in capacity, before running costs. It becomes a cash saving only where it removes real spending. For more on that sum, see the real cost of manual work.
How does data protection apply to expense claims?
Expense claims contain personal data, so UK GDPR applies. That data includes names, travel details and sometimes bank details for reimbursement.
Know where any tool stores the data, give access only to people who need it, and keep records for as long as HMRC and your accountant require.
How do you start automating approvals?
Start with one flow and the rules you already use:
- Write down your current approval rules, even if they are informal.
- Note how long approvals take, and how much time is spent chasing and checking.
- Choose one flow, either purchase orders or expenses, and automate that first.
- Check that the new process connects to your accounting system before you switch.
Where Forwardcycle fits
Our cost reduction service helps you map your approval process, decide which checks to automate and keep people on the decisions that need them. To see where it fits your business, take the free AI Readiness Assessment.