Purchasing Approval, whether by Budget Holder or Non-Budget Holder is an optional feature of the system - and the system will continue to function quite happily without either having been implemented. You are reading this Article most probably because you want to implement Purchase Approval without the need to set up Budget Holders – which process is detailed in another article; “How do I Implement Purchasing Approval with Budget Holders?”. Purchasing Approval refers to the approval of both Purchase Orders (if you use them) and Purchase Invoices. Such Purchase Approval can be by nominated Budget Holders or Non-Budget Holders (who are initially associated with a range of Suppliers (Vendors)). This article deals with the latter.
An “Approver” is someone in your organisation (or associated with your organisation) who has the authority to approve Purchase Orders and Invoices on behalf of the company (Purchasing Approver), or alternatively, one who is authorised to approve Supplier Payments (Payment Approver) – detailed in another Article entitled “How do I Implement Batch Payment Approval”. Purchasing Approvers can be either Budget Holders or not – depending on whether or not you wish to implement Budget Holders and Commitment Reporting. In addition all Approvers can either be users of the system or not – those who do not have access directly to the system will communicate with it via email. You should decide initially whether you wish to base your Approvers on Budget Holders or non-Budget Holders (a nominated Approver associated with a range of Suppliers (Vendors)). Note that it is possible to change from non-Budget Holder Approval to Budget Holder Approval later on, if you have implemented the former first. Also, if you are already using the existing Approval Workflow, then after the introduction of this new version of the system, your existing Approvers will be treated as Non-Budget Holder Approvers (i.e. Supplier (Vendor) based) initially.
Not all Orders/Invoices require Approval even if Purchase Approval is implemented system wide. Within the Purchase Approval process, there are facilities for exempting certain Suppliers (Vendors) – e.g. Electricity, Water, Rent, etc. and other Suppliers (Vendors) from whom you typically only procure small Items (e.g. Stationery, Refreshments, etc.) and who do not require Approval. This is achieved by de-selecting “Exclude from Approval” against such Suppliers when setting them up in the system. If “Exclude from Approval” is not set for a Supplier (Vendor) then any Orders/Invoices for that Supplier (Vendor) will be automatically approved.
You can enforce the entry of Purchase Orders against selected Suppliers (Vendors) which, if implemented, ensures that no Invoices from that Supplier (Vendor) can be processed without an Order having first been entered, with the Invoice subsequently undergoing an Invoice/Order Matching process. In the Invoice/Order matching process, if the Invoice exactly matches the Order in respect of all Lines, Quantities and Prices, then the Invoice is presumed to be approved and bypasses the Invoice Approval stage of the process.
Non-Budget Holders are linked to Suppliers (Vendors) – that is to say that if your Approval process is based on non-Budget Holders, then the initial Approver (If any) will be retrieved from the Supplier (Vendor) record when you prepare a new Order or Invoice. You can, however, if you wish, override this Approver when you subsequently complete and process the Order or Invoice by nominating an Approver of you own choosing at that stage.
Requesters (Requisitioners) are generally non-system users, such as field operatives, who raise, or cause to be raised, Purchase Orders, and who may not have access to the system – but also have the ability to communicate with the system via email. They are kept informed throughout as to the status of their Orders as it moves through the approval process. Budget Holders and Approvers can also be nominated as Requesters (Requisitioners).
In addition, please note that only a user with an “Administrator User Role” has the capability to add or change a Supplier’s (Vendors) nominated Approver and the “Order Required” setting on the Supplier’s (Vendors) record (and also the set up or the subsequent alteration of a Supplier’s (Vendors) Bank details for Payment purposes).
N.B. You should note that Purchase Invoices entered into the System via the “Batch Invoicing” entry option do not undergo Invoice Approval and will be posted directly to the Supplier Account as normal. In this way, you can also facilitate the entry of Invoices for small amounts, or Invoices which do not require approval. This, however, is a security risk and might defeat the purpose of implementing Invoice Approval in the first place. So, if you wish all your Purchase Invoices to undergo the approval process, then you should remove the Batch Invoicing option from your Menus (or severely restrict its usage) - thereby requiring all Invoice processing to be carried out using the “Item Invoices” Menu option. Refer to Section 3. of the Article “How do I use the Client Administration System Layer to Add End Users and Control their Permissions?” which details the control of the Menu Options which various users can or cannot access.
2. Switching on the Approval Processes and Creating/Adding Approvers and Requesters:
The first task is to switch on Purchase Approval followed by the setup of the various approvers. You must have the appropriate permissions in your Menu Profile to access this function. In other words, the “Purchase Approver Setup” under Approvals in Purchases must be enabled for you in your Menu Profile.
The Approval Parameters are contained in the “Approval Settings” Tab of Company Details and Settings. Here you can “switch on” (i.e. implement) Purchasing Approval, or Payment Approval, or both. As explained in the introduction, you can choose to implement Purchasing Approval either by non-Budget Holders (initially linked to Suppliers (Vendors)) or Budget Holders by ticking the appropriate “Approval Type” here.
However, should you wish to nominate your own Approvers for both Order and Invoices, you can do this by ticking the box “Manual Approval Nomination Enabled”. This will allow you to override the system derived approver and nominate your own approver at the completion stage of the Order or Invoice. This nominated Approver must, however, have the same or higher financial authority as that of the system derived approver.
You can also over-ride/inhibit (system wide) Order and Invoice approval for small amounts. Key in this amount in the field provided. In addition, if the Order and/or Invoice received from the Supplier (Vendor) exceeds the Order value by small amounts, you can inhibit it’s re-circulation for approval if the amount of variation is less than an amount you specify in the field provided. Otherwise it must go through the Approval process once again.
Third party Invoices may originate from external sources such as OCR Scanning or some other integration such as EPOS. You can opt to have these Invoices go through the Approval process or not by ticking the appropriate box in this set of Parameters.
Approvers are set up as follows, and again, you must have the appropriate access permissions in your Menu Profile to carry out this setup and maintenance task;
To add a new Purchasing Approver, click on “New Purchase Approver” which will bring up the following window. Here, you can nominate an existing system user – in which case a selection drop down will be presented and his/her email address will be filled automatically. Or, you can nominate a non-system user, in which case you must enter his/her name, email address and the “Notify by Email” tick box is obligatory. If you opt for a System User, then you can, if you wish, un-click the “Notify by Email” tick box. In this instance it is assumed that the user in question has direct access to the Purchasing System and can review the Orders and Invoices grid and approve or otherwise from within the system.
Approvers can operate in “chains” of ever higher financial approval authority. If James Smith is the default Approver for a particular Supplier (Vendor) and the Order or Invoice exceeds 200.00, then, as an Approver for that Order/Invoice he will be replaced by the Approver next in line – who is nominated in the “Route to When Limit Exceeded”. Obviously, this next in line must already be set up and have a financial approval level greater than the current one – but it doesn’t necessarily have to be the immediate next in line (Gerry James). It can just as easily be either of the “No Limits”. Equally if the Order/Invoice exceeds Gerry James’ 500.00, then he must be replaced by an Approver with a higher level of financial authority, and so on. However, all chains must contain a “No Limit” as a terminator.
Approval is based on the Nett Value of the Order or Invoice before any Tax is calculated.
If you wish to amend any of the details relating to a Purchasing Approver, Click on the “Actions” Drop Down on the right hand end of any Approver in the Grid.
You may also want to set up Requisitioners (Requesters). These are the people from whom the request for the Order to be placed originate, and who will eventually receive the goods when they arrive. Generally speaking, they have no access to the system but can communicate via email. They are continuously updated as to the status of their order as it moves through the approval process right through Delivery and Invoicing. Anybody in the organisation can be set up as a Requester.
To set up your requesters Go To > Setup > Codes Maintenance > Requesters (under (Customers & Suppliers (Vendors)), which will bring up the following window;
To add a Requester, Click on the “Add New Requester”. To modify the details of an existing Requester, Click on the “Edit” button.
The Requester (Requisitioner) is now an optional field of the Order Entry screen;
As mentioned in the Introduction, you can enforce Orders as a pre-requisite to Invoicing - and/or you can also exclude certain Suppliers (Vendors) from the Approval process (with the aforementioned exceptions regarding Utilities, Orders for small amounts, etc.). You can set or unset both these rules at Individual Supplier (Vendor) level. However, in the “Defaults” settings under “Company Setup” you can also invoke these rules, Company wide, by ticking either, or both, of the tick-boxes highlighted below. Note that, these company wide rules will only take effect for all new Suppliers (Vendors) from the point that you set these parameters to take effect – and will not have retrospective effect on existing Suppliers (Vendors). You can, of course, un-set either or both parameters at the individual Supplier (Vendor) level.
3. Purchasing Approval with Non-Budget Holders:
In this example, we have chosen (i.e. ticked the button) “Supplier (Vendor)” in the Approval Settings Tab of the Company Details and Settings to indicate that we are just going to use non-budget holder approvers for our Orders and Invoices and we have already set up our Approvers and their chain of financial limits. Budget Holders do not feature in this example implementation.
4. The Order Approval Process:
Each Supplier (Vendor) must have a default Approver selected unless the “Exclude from Approval” tick box is checked, in which case approval in not required for this Supplier (Vendor) regardless of the Approval Parameter settings. In addition, if the “Manual Approval Nomination Enabled” check box is ticked, then the selection of an Approver here is not mandatory. Otherwise, you must choose an Approver from the Drop Down provided;
Without this, if you try to enter an Order for this Supplier (Vendor), you will receive an error message like this;
In this example, I’ve prepared two separate Orders: The first is for 225.00 which is within approver Gerry James’ financial authority. The second is outside his limit and therefore requires the next approver in the financial chain, who has the requisite financial authority, to become the approver.
After entering an Order, the system, or rather the current logged in User, sends an email to the Requester (if any) as follows;
The Requester now has the opportunity to appraise the Purchase Order, and if he has any amendments, then he can send a return email describing the modifications he requires. As stated in the email, any changes which result in a new quantity or new value will result in the Approval process starting over.
The Approver is also sent an email asking him to approve the Order or Reject it. Along with the email is a pro-forma copy of the Order and its details;
The Approver now has the opportunity to approve the order or reject it. In this instance, we’re going to reject the order;
Having rejected the Order, the Approver is asked to supply a reason for the rejection. The Requester (if any) is now sent an email telling him the Approver has rejected the Order. Back in the system, the Order now shows as having been rejected by the Approver, together with the reason for the rejection. You now have the opportunity to Cancel the Order under “Actions” on the right hand side of the Order entry in the Grid.
Had we decided to accept the Order instead;
The Order now is now shown as approved in the Orders Grid with your Note attached and awaits receipt of the Goods from the Supplier (Vendor);
The Requester (if any) is now sent an email telling him that his Order is now approved.
Had the Approver been a System User and the “Notify by Email” tick box was blank, then the approval process is as follows; If you are logged in as this User then you will find the required Approval functionality under “Actions” at the right hand end of the entry;
In the Grid, in the Column Approval Status, the words “Pending Approval” generally means that an email has been sent to the Approver, whereas “Pending your Approval” refers to a System Approver who will use the “Actions” Drop Down to effect the next step.
You must now send the Order to the Supplier via email by clicking on the Email Icon against the Order you wish to send;
Which will bring up the following window where you must enter the email address if it’s not already on the Supplier’s (Vendors) record;
5. The Invoice Approval Process for Un-Ordered Goods for Non-Budget Holders:
Obviously, if the “Order Required” Tick box is set to “On”, then the Invoice cannot be entered until the Order has been entered. Instead, you will get this message;
Only Invoices with the “Exclude from Approval” tick box set to “Off” (and the “Order Required” set to “Off”) in the Supplier (Vendor) record will arrive here and need to undergo this process. However, if they are below the threshold set in the Approval Settings Tab of the Company Details & Settings then they will be automatically approved without undergoing this approval process. Similarly, for 3rd party Invoices arising from external systems, if this tick box is left “off” in the Approval Settings tab, then these will not undergo approval either.
Follow the same procedures as you would for Order Entry – except that, in this instance the Requisitioner is not required. Enter the Invoice details and “Save”.
The same rules apply regarding the financial hierarchy of Approvers, and either an Email will be sent to the Approver, or he/she will Approve or Reject the Invoice using the “Actions” Drop Down.
When the Invoice is Approved, it is now ready for “Posting”;
All of the foregoing equally applies to Purchase Debit Notes (i.e. Supplier (Vendor) Credit Notes).
6. The Combined Order & Invoice Approval Process for Non-Budget Holders:
The following procedures apply when the Order and the Invoice are both required to undergo approval. In this instance you will only arrive here and undergo the following process if there is an Order in the system which has or awaits approval, and “Exclude from Approval” is also set to “Off” in the Suppliers (Vendors) record. As before there are a couple of exceptions; If the Order is less that the minimum stated on the Approvals Parameter Settings, then it does not require Approval. Similarly, if the Invoice value is also less than this amount, then it does not require approval either. And, if the increase in value of the Invoice over the Order is less than the amount allowed on the Approval Parameter Settings, then re-Approval is unnecessary.
Enter the Order as described in 4. above and process it to the stage of “Approved”. The next step is to “Receive” - which you cannot do until the Order is Approved. When this happens, Click on “Receive” and receive the Goods (full of partial) that you have received in good condition.
You can, here, amend the Quantities received, which might be less or more than that ordered - but in this instance we’re going to “Receive All”.
The Order now moves to the Deliveries screen, where you can Invoice it from the Drop Down under Actions of the right hand side of the grid entry.
In this instance, because the Invoice exactly matched the Order in terms of Quantities and Values, and the Order has gone through approval successfully, the Invoice is automatically approved. Had the value increased by more than that allowed in the Approval Settings, then the Invoice Approval would re-begin.
In addition, it may be the case that the physical Invoice received from the Supplier differs from the Order – either in Quantity (excluding partial deliveries discussed below) or Value. If so, during the Invoicing process, you can amend the Price by double clicking on the field and amending it so that it now matches the Suppliers Invoice. You cannot, however, amend the Quantity in this instance. You can also add lines for other services such as Transport and so on. The nett result is that the amended
Invoice, if the Value increase is greater than that specified in the Approval Settings, then the Invoice will go for re-approval before it is processed further. If there is a Quantity difference between the Supplier’s (Vendors) Invoice and what was received in good condition (i.e. what the GRN shows) then you must take action to get a new modified Invoice from the Supplier (Vendor) before progressing this delivery.
In this next example, we’re going to examine the situation whereby there are multiple Deliveries and multiple Invoices against a single approved order. Enter the multi-line Order and process it through to the Approval stage. Receive 2 of the Items on Line 1 of the Order;
You can now go to the Deliveries Tab and process an Invoice, when it arrives, or not. In other words, you can first receive other shipments;
You have now partially received two of the Line Items ordered. Let’s say there is a delay on the remainder of the goods and the Supplier (Vendor)decides to Invoice you for your deliveries to-date at this stage. When you receive the Supplier (Vendor) Invoice go to the Deliveries Tab and click on “Invoice”.
You will now see that the two deliveries have been amalgamated and ready for Invoicing. If you receive further shipments they will also be added and amalgamated. You can now Invoice these Deliveries by clicking on “Save” on this screen. Again, because the Invoice agreed with the Order in terms of Value and Quantity, the Invoice does not undergo Approval but now appears under “Item Invoices” awaiting Posting. The accompanying “Notes” Icon will detail the Approval process.
N.B. Orders and Invoices can be re-submitted for Approval (in case of a lost email, Current Approver on leave or whatever) by clicking on the re-submit for Approval at the bottom of the Order;
Or from here;
The same applies to Invoices.
N.B. If one of your Approvers becomes unavailable for any reason, and he has outstanding Orders or Invoices in the system, you should follow this procedure to assign his outstanding Orders and Invoices to another Approver: The Orders Grid will show you all the Orders awaiting this (absent) Approver’s action. Go to each Supplier in turn who has this Approver nominated and change the Default Approver to another one which has the same Financial authority. Then Re-Submit the Order for Approval against this new nominated Approver. Do the same for the Invoices Grid.
7. Manually Nominating an Approver:
then regardless of what the system has derived in terms of the relevant approver, at the end of Order entry or Invoice entry, when you click on “Save”,
then you will be presented with the following window;
Choose you Approver from the Drop Down (or not) followed by “Submit for Approval”. This new approver will now replace the system derived one for this Order/Invoice before starting the approval process described above.
8. Approver Reporting:
There are two Reports provided with the Supplier Approval process. The first is a list of the Approvers, the BI Codes for which they are a nominated approver and the Orders and Invoices awaiting progress;
The second shows the current status of expenditure against a variety General Ledger and BI Codes detailing Actual Expenditure To Date, Commitments, Budgets and the Amounts available for further expenditure.
A new Dashboard provides a high level view of actual and committed expenditure versus budget year to date. This is an excellent visual of the overall committed and actual spend relative to the budget and whether there is currently under or over spend in a particular area/period and the overall trend:
You can drill down further in the dashboard by choosing a particular BI Code and then drilling into the monthly position. The dashboard also provides a breakdown of the Purchase Orders and Invoices related to the expenditure and contains a summary of the expenditure by approver by BI Code.