From new startups to established corporations, every business must have some procedures in place to handle approvals. This might look like giving the okay on a new apparel design, approving a vendor invoice to be paid, or finalizing payroll.
Either way, approvals are an important part of any successful business. They ensure that a business’s resources are deployed appropriately, it’s operating in accordance with relevant laws and industry guidelines, and activities align with high-level objectives.
But while some approvals can be relatively straightforward, like an employee’s time off request, more critical activities require additional approval layers and input from numerous personnel.
To simplify more complex, multi-stage approval workflows, teams may decide to use an approval matrix. In this guide, we’ll explore the basics of approval matrices, the benefits they provide, and how to set one up for an organization’s unique specifications.
What is the approval matrix?
An approval matrix, or a “schedule of authority,” is a visual guide that helps teams determine who has approval authority for a given project, purchase, or activity as per company policies.
As mentioned above, it’s meant to simplify approval workflows on projects or business activities that may require input from multiple department heads, executives, managers, or other decision-makers. Approval matrices may be used to aid decisions regarding:
- Vendor invoices
- Employee hiring activities
- Capital expenditures
- Purchase orders
- Expense reports
Ideally, the matrix helps streamline the approvals process and eliminate confusion about who has the authority to approve certain projects or who has the final say on a business activity or decision.
Key components of an approval matrix
The general structure of an approval matrix is relatively simple. It usually takes on a grid or table-like appearance, though each organization can create a matrix that best suits its approval and decision-making needs.
Usually, the main components include one axis that lists the specific roles or individuals who have been identified as approvers, and the other axis that lists the conditions or criteria that determine each person’s authority.
The matrix allows those involved in procurement to see whose approval they need for a given purchase based on the total dollar value, helping them adhere to company policies and go through the proper channels.
Using this sample matrix, if an employee requests to make a purchase worth $9,000, it will need to be approved by their manager, then the department head, before the director gets the final say.
Benefits of Using an Approval Matrix
Approval matrices are useful for organizations that need to manage multi-stage or conditional approvals. Here’s a closer look at the advantages of using an approval matrix to make these decisions.
Enhanced efficiency in workflows
Primarily, an approval matrix is meant to streamline approval processes and enhance team efficiency. The goal is to eliminate confusion or guesswork when a certain activity requires higher approval levels.
For example, an accounts payable approval matrix should clearly indicate which approvers need to be involved, given the payable or invoice amount.
When designed effectively, an approval matrix should help reduce or eliminate delays in the approvals process, as key stakeholders understand exactly who needs to approve the activity and any additional approvals that remain.
Improved compliance and accountability
Approval matrices are also useful for organizations to ensure compliance with internal policies and procedures. It clearly illustrates the approvals that are necessary for a given project or activity, making it easier for team members to involve the proper personnel.
Further, it can also foster accountability among the team. It clearly displays which team members are responsible for which approvals, reducing the risk that an approval might be missed or purposely ignored.
Streamlined communication among stakeholders
Finally, the matrix helps to eliminate unnecessary communication or interactions for a given approval.
The matrix should make it clear exactly who needs to be involved, and, unless their input is required, all other stakeholders can be left out of the conversation.
Designing an effective approval matrix
Creating an approval matrix doesn’t have to be overly complicated. However, each organization needs to tailor approval matrices that align with its internal policies for purchasing, hiring, or other business activities.
Continue reading below for an overview of the steps involved in designing an approval matrix and helpful tools to get started.
Steps to create an approval matrix
- Define the workflow
Start by identifying the specific workflow that requires approval, whether that be inventory purchases, employee expense reports, or marketing campaigns.
It’s best practice to design a matrix for just one workflow to avoid creating any confusion and ensure it’s an easy-to-follow aid for the decision-making process.
For example, don’t try to design a matrix that the team can use for both invoice approvals and employee hiring. There are likely different stakeholders and decision criteria involved, so it’s best to create a dedicated matrix for each one.
- Identify approvers
Determine which employees have approval authority for the identified workflow, and consider the appropriate hierarchy for each.
These individuals will be listed on one axis of the approval matrix table or chart. It can be helpful to list them in descending or ascending order of approval authority for ease of use. This will help teams understand the proper routing for multi-step approvals.
- Establish approval conditions
On the other axis, define the various thresholds or approval levels related to the workflow, which will determine which approvers need to be involved in the decision.
In the above matrix example for company purchasing, the dollar value is the condition that the team would use to gauge whose approvals are needed.
However, if the matrix were for marketing campaign approvals instead, then the conditions might be the specific project being worked on, be it a social media post, a blog, a press release, etc. In this case, marketing campaigns deemed most critical might require approvals from more senior team members.
- Complete the matrix
With both axes organized, the final step to creating the matrix is to mark which approver has the authority at each criteria level or threshold.
This is a critical step that determines the usefulness of the matrix. It may require reviewing company policies, speaking with key decision-makers, and referencing any existing documentation to ensure it assigns the appropriate approval authority.
- Get stakeholder feedback
Before fully implementing a new matrix across the organization, seek feedback from relevant stakeholders who will routinely use it. They’ll help verify that the matrix is easy to follow and properly aligned with company policies.
Based on their hands-on experience navigating such approvals, they may offer helpful input regarding the thresholds or proper routing that the matrix should account for.
- Monitor and refine
As an organization continues to grow, its approval policies and workflows will likely evolve. Thus, approval matrices are not set in stone and should continue to adapt to the organization’s changing needs.
Once implemented, periodically follow up with stakeholders to ensure the matrix is still working as intended.
Tools and technologies that can assist in design
Designing an approval matrix can be as simple as creating a table in a spreadsheet or a document that the team manually references for each applicable activity.
However, with the right tools, teams can automate the execution of the approvals matrix to enjoy a hands-off approach for these workflows.
An automated accounts payable and accounts receivable solution, for instance, enables teams to set up automated approval routing that’s tailored to their unique business requirements.
Common Challenges in Implementing an Approval Matrix
There are potential roadblocks teams may encounter when designing and implementing approval matrices. The following are some of the common hurdles to be aware of during this process.
Resistance to change
It’s possible that certain stakeholders will be reluctant to adopt a new tool or visual aid in their workflows. If they’re used to navigating approvals a certain way, they may be resistant to the change.
However, the matrix shouldn’t necessarily add any extra work to their plate. In fact, it’s likely to make their lives easier, providing a clear reference for the approvals that are needed for the specific activity they’re working on.
Maintaining flexibility
Teams may struggle to design an approval matrix that’s rigid enough to clearly guide approval routing decisions, but is flexible enough to accommodate changing organizational needs.
Over time, teams may determine that they have certain exceptions that require additional approvals outside of what the matrix reflects. For instance, maybe they have determined that all invoices to a certain vendor require additional approvals, regardless of the value.
As a company scales, increases purchasing and order volumes, and expands the team, its approval matrices should continue to adapt to reflect its new requirements.
How BILL can help streamline your approval process
While approval matrices on their own can be helpful tools for businesses to streamline the approvals process, teams can take things one step further by automating this workflow for better efficiency.
BILL delivers approval matrix automation for financial workflows, allowing teams to create custom payment approval policies, automatic routing, and the ability to review and accept approvals on the go from mobile.
Sign up for a free trial of BILL today to see how the platform can help simplify and accelerate your approvals process.
Frequently Asked Questions
What is the approval matrix?
An approval matrix is a visual aid that helps teams manage multi-level approvals and understand who needs to sign off on certain projects or business activities.
What is the main purpose of an approval matrix?
The purpose of an approval matrix is to simplify approval workflows for teams. The matrix should clearly lay out whose approvals are needed for a given activity, helping the company adhere to internal policies and involve the right stakeholders in key decisions.
