What is an Approval Matrix and How to Automate It?
Key takeaways
- An approval matrix helps you accelerate and streamline approval workflows for a simpler purchasing process
- Approval matrices clearly outline who is required to sign off a business purchase as per company policies
- Approval matrices play a key role in the purchasing function and protects its funds
- Designing an approval matrix is simple when aligned with the organization’s rules and hierarchies
Approval workflows are an integral part of key business functions in organizations. As businesses grow and evolve, the purchasing process becomes more complex and needs to handle huge volumes of purchase requests and purchase orders. Increased number of purchase requests mean more spending, which creates a disorganized environment that needs updating.
The best place to start organizing is your approval workflow. Designing and implementing an approval matrix is the best way to streamline and accelerate approval flows. Scroll down to know more about the approval matrix, how to design it, and ways to automate the approval matrix.
Table of Contents
What is an approval matrix?
A company’s purchase approval matrix is essentially a table that outlines who is required to sign off on a business purchase as per company policies. The approval matrix also provides the business rules for routing the approval tasks for purchases. The matrix approval outlines various stages in the team’s approval process, including which approvers or stakeholders are required to sign off on specific behaviors within those stages.
From paying invoices to launching new products and marketing campaigns approval workflows play a role in all processes. Following approval workflow protocols ensures that an organization protects its funds, reputation, resources, and even compliance with policies. For example, an employee’s request for time off involves a simple straightforward approval workflow. The first step is when an employee submits a request for approval. The manager then reviews the request and approves or rejects it based on employee eligibility. However, not all approval workflows are this simple and straightforward.
Running a small scale business that has simple and straightforward approval steps may not require an approval matrix. But, as the business grows and processes become more complex and handle larger transaction volumes, an approval matrix becomes a must. Having an approval matrix streamlines approvals and eliminates bottlenecks in the approval workflow.
An approval matrix template is designed according to the company’s policies that are already in place, as well as to the company culture, stakeholders, and stakeholders. The decision makers in an approval workflow may be managers, department heads, or C-suite executives. Once an approval matrix format is in place, the team is provided with an official approval policy and therefore, a structured roadmap to control costs and eliminate chaos and confusion.
Structure of the Approval Matrix
A company’s policies determine the approval matrix format. They dictate the characteristics and approach of the approval process. The structure of the approval matrix is made of the following elements –
Tools
These are the set of tools that are used to carry out the purchasing process. Since the purchasing process is made up of several approval steps, these tools streamline the process.
Policies
The guiding principles that determine the manner in which approvals need to be carried out. These policies determine the required approvals for different spend scenarios.
Stakeholders
Identifying all the stakeholders involved in the process is an important part of the approval matrix. Who should approve what must be clearly defined by the approval matrix? One leg of the matrix table is used for listing all the stakeholders.
Spend structure
The hierarchy in the organization must be clearly defined in the approval matrix. The approval matrix must represent the organizational hierarchy of teams, departments, and budget ownership.
Spend culture
The behaviors, practices, and values in place that influence or dictate spending decisions. The approval matrix must clearly specify the factors that influence spending decisions in the organizations.
Why do you need an approval matrix?
The procurement process typically involves several approval steps. Other processes that involve multiple approval steps are marketing, finance and accounting, and HR. Approvals when carried out manually, are time consuming and prone to error.
Statista Research revealed that brands took an average of 10 days to approve a piece of marketing work.
When the approval process is streamlined with the help of an approval matrix, teams gain clarity on approval timelines and lines of authority. A matrix for approval helps key decision-makers make informed decisions on spending. Why do you need an approval matrix? Here is why –
Gain clarity on spending
An approval matrix ensures that every expense stays within the budget and is based on the established approval matrix. This standardizes the decision-making process.
Consistency in decision-making
It promotes consistent decision-making across projects and tasks. Consistent decision-making is extremely important for maintaining quality standards and aligning with organizational objectives.
Establish accountability
An approval matrix establishes a clear line of accountability, which makes it easier to identify who is accountable for each approval. Establishing a clear line of responsibility helps in tracking progress and resolving any bottlenecks efficiently.
Saving time
An approval matrix saves time for the team by preventing excessive back-and-forth communication and delays in the approval process. Saving time on approvals helps teams meet deadlines and guarantee that spending decisions are made in a timely fashion.
Enable efficient workflows
When the approval process is specified clearly, it streamlines the flow of tasks and prevents unnecessary delays. Efficient approval workflows ensure that approvals are obtained promptly and tasks progress smoothly.
Avoids confusion
With a clearly designed approval matrix there is no room for misunderstanding or uncertainty regarding approval procedures. Team members are clear about who to approach for approvals without any confusion.
Designing the Approval Matrix
Creating an approval matrix is straightforward and simple to create, when you are clear about the organization’s rules and hierarchies. Remember to focus on an approval matrix for one type of workflow. The company’s culture influences the structure of the approval matrix. This dictates which stakeholders need to be included in the matrix. The influencing factors could be – budget items, special types of purchases, monetary thresholds, vendors and subsidiaries.
Here are some steps to create the approval matrix
- List the conditions determining the approval workflow – Once you are clear about the type of workflow you are creating, list all the conditions that will determine who the approval should be routed to. For instance, in a budget approval workflow, conditions could be based on the amount of the proposed budget, or department or project.
- List out key decision makers – Once the conditions are clearly established, the rules of the organization need to be reviewed. These rules must be listed on one axis of the table. Decision makers that are not related to the conditions on the first axis must not be included in this step. This will make the table look overcrowded.
- Organize the information – Plot a point at the intersection of each condition and the decision maker that has the approval authority over it. At the point where the intersection makes sense, rearrange the list of decision makers as per the hierarchy of authority.
Before you begin to outline the approval matrix in a visual representation, consider the company’s culture as a whole. You must also consider various levels of the spend pyramid that influence the foundation of the finished matrix. The company’s culture will influence the structure of the approval matrix. The culture dictates who the stakeholders are. The other policies will be determined by the company structure and stakeholders. The influencing factors like budget items, monetary thresholds, vendors and subsidiaries, and special types of purchases vary with the type of organization and its rate of growth. Each of these influencing factors must be reviewed and solidified before moving ahead with the design of the approval matrix.
Examples of Approval Matrix
An approval matrix sets out the key priorities for any decision-making process and the basis on which decisions are made. The basis of an approval matrix is the “if X then Y” structure that creates clear rules. An approval matrix can essentially be applied at every level of an organization. Let us consider some examples of approval matrices:
Purchase approval
It is common for organizations to assign approval authority for purchases and other expenditures based on the amount of money invested. Higher dollar amounts usually require approval from higher-ranking officials. A purchase approval matrix works best when the key decision makers are listed in the order of the hierarchy, with another axis that delineates differing approval conditions. The chain of approval is clearly illustrated in the purchase matrix.
The biggest challenge for some organizations is to manage purchase approvals due to multi-tier hierarchical structure. This challenge is more prominent in companies that have different stakeholders spread across different departments and business units.
New project approval
A project may involve multiple departments and teams. It may be important for multiple people to give their approval for the project depending on a team member’s expertise or availability. Such project approvals workflows do not involve hierarchy, where the approval by one executive moves a workflow up the chain of command for further review. It features a parallel process, where multiple decision-makers review the request at the same time to reach consensus.
Unlike the purchase approval matrix, the new project approval matrix does not depict any hierarchical or sequential workflow. The new project approval is a parallel process, where decision-makers examine a request simultaneously and arrive at an agreement.
Content approval
The stakeholders reviewing the content in the content approval workflow must have expertise in the subject published by the organization. As projects become diversified, not all the stakeholders will need to review each piece of content. The content approval matrix policy illustrates which stakeholders need to review and authorize the drafted content before being published. The workflow is also depicted as a parallel process and assigned based on the experience level of the employees.
The sample approval matrix for the content approval process is given below. In the sample given below, the top axis lists the decision makers from left to right in the order of authority. The first X in the column illustrates who should review the first draft, while the last X indicates who gives the final approval.
| Social Media Manager | Marketing manager | Director of marketing | CEO | |
|---|---|---|---|---|
| Social media post | X | X | ||
| Blog | X | X | ||
| Website copy | X | X | ||
| Infographic | X | X | ||
| eBook | X | X | ||
| Presentation | X | X | X | |
| Press Release | X | X | X |
Expense approval
Approval of expense claims is an essential part of every business. Manual expense approval processes result in a high incidence of duplicates and maverick spending. Designing an approval matrix for expense approval minimizes the chances of unexplained expenses being approved.
Best Practices in Creating the Approval Matrix
Define your policies
Approval authority is one of the most important things to consider while designing the approval matrix. Assigning approvers according to monetary thresholds is one way of assigning approval authority. Another way of assigning authority is based on specific budget items. In some workflows, a unique approver may be required for specific situations or purchases. It is important to identify such steps in the workflow and define the circumstances and budget associated with the step. Subsidiaries in any organization may entail slightly different processes, and hence, may require different approvers. The approval matrix must clearly define all these special conditions clearly and assign approval authority accordingly.
Define stakeholders
All the stakeholders should be outlined in the approval matrix along with the team or department they are part of. This will provide a clear picture of the key players and minor stakeholders in any approval process. Aside from defining stakeholders, you must also define each tier of approvers. A clear definition and outline of the hierarchy of approvers is a must in an approval matrix.
Ensure alignment with organizational structure
Once the policies and stakeholders are clearly defined, the next step is to review the hierarchy. The policies that are outlined in the approval matrix must align with the organizational structure. While reviewing, you must also establish the authority that is responsible for signing off.
Stay updated on changes
Entry of new supervisors or departmental shifts may require amendments or updates to the approval matrix. It is important that you stay aware of any changes in hierarchy to ensure that all stakeholders are kept informed and the updates are incorporated in the matrix.
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Deploying the Approval Matrix
For progressive companies it becomes imperative to automate the approval process. As business operations expand, the need for a seamless approval process increases. An approval process can be easily automated when there is an approval matrix. With an approval matrix in place, teams will have visibility and control over each operation.
Rather than relying on manual processes like emails and spreadsheets to manage approvals, the approval matrix comes as a welcome guide that will contribute to more organization and collaboration. The effectiveness of the approval matrix is further amplified with automated tools like cloud-based purchase management platforms or vendor management systems. A no code workflow automation solution like Cflow can effectively automate the purchase process. The visual form builder in Cflow can create purchase workflows easily. Based on the inputs from the purchase approval matrix, the approval workflow is created.
It is important to understand that you need to have an automated approval process for streamlining the workflow and eliminating bottlenecks. The time and effort spent on designing the approval matrix will be wasted without the right tools.
The approval matrix template can be the guiding principle for business by identifying the required approvals workflow for different scenarios. The business’ spending structure is heavily influenced by the overall culture and practices in making the right expenditure decisions. A good approval flow holds stakeholders accountable for approving expenses and streamlines the approval process. To support the approval matrix, you need the right workflow tool for automating the process. Here are some tips for automating the approval workflow –
Create a simple approval policy – The approval policies must be simple and easy to implement. The approval policies must be applicable for all the departments in the organization. The software chosen for automating the approval workflow must be flexible to accommodate new policies, budget value changes, etc. The policies on which the approval workflow is based must be clear and simple.
Add rules to bypass exceptions or complex approval flows – Handling approvals in businesses with complex and large organizational structure might be difficult. Setting separate workflows for each level of hierarchy can be tedious and not sustainable. The approval rules must be clearly set for handling exceptions or complexities.
Oversee the approval process – The approval progress and status must be centralized into a single dashboard. This makes it easy to manage approvals and take actions like following up with the approvers. A no code workflow solution like Cflow sends automated alerts and notifications to approval authorities so that deadlines are not missed.
Streamlining the approval workflow with the right automation tool ensures that the learning curve is steep for the team and new staff can be onboarded quickly.
Challenges in Approval Matrices
Companies face several challenges while implementing approval matrices. Not all organizations have clear transparency around the decision making authority. Without clarity around the decision making authority, the approval process can become slow and tedious. Lack of clarity and transparency can be frustrating for the employees, and could lead to maverick spend.
Another challenge is that requests can be lost when approval matrices lack centralization. Misplaced or lost requests can get buried in email threads, or lead to awkward conversations.
Scaling of approval matrices is another challenge faced by teams. The scattered flow of information slows down the work for departments. Scaling companies must ensure that every system and business process must be set prior to periods of growth.
In a nutshell
Approval steps are an integral part of all business processes. Delayed approvals can affect business outcomes significantly. Manual business processes are ridden with bottlenecks that occur due to lack of clarity and transparency. As business operations expand, it becomes extremely important to clarify approval roles to avoid confusion and chaos. This is where an approval matrix can make a significant difference. Approval matrices give a robust basis for automating the approval process. Matrix for approval can speed up the approval process. Automate your approval process with a versatile automation solution like Cflow. Explore Cflow right away by signing up for the free trial.
FAQs
What is an approval matrix?
An approval matrix is a table that outlines who is to sign off what in an approval process as per company’s policies.
What are the main components of an approval matrix?
The stakeholders and their responsibilities (as outlined by company policies) are the main components in an approval matrix.
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