What are approval chains?

Approval chains, also known as approval workflows, are a series of approvers – each with different level and authority – that a payment request will go through before being accepted.

Approval chains ensure that each payment is authorized by the right authorities. These workflows decrease the chances of fraud and error.

Typically, approval chains are used for larger payments. They often start with the contractor, employee, or vendor making a payment request, and end with the final manager or supervisor reviewing it.

Upon review, these decision makers approve or reject the request, depending on the policies and procedures in place.

Why are payment approval chains important?

Payment approval chains ensure payments are authorized by the right people, reducing fraud and error risks.

Prevents fraud

Involving multiple people in the approval process reduces the risk of fraud and wasted spending.

Ensures compliance and best practices

Approval chains help organizations stay compliant with policies, procedures, and best practices.

Improves accuracy

Payment approval chains follow approved processes, rules and criteria.

Improves accountability

Approval chains increase transparency and accountability in the procurement workflow.

Unlocks payments volume

An efficient approval process allows companies to manage cash flow and achieve their goals.

Improves efficiency and creates a smoother payment experience

More efficient processes create a smoother payment process. Payment approval chains prevent bottlenecks from occurring when one person initiates and approves payments. This also frees up resources, as everyone in the chain has a specific role and can move on to other initiatives once they fulfil it.

Use cases for approval chains in payments

Use cases for these types of approval chains tend to vary depending on the organization, the type of payment being processed, and other factors.

Here are some examples of how these chains can be used:

• Vendor payments: Vendor payments to suppliers tend to be larger. That automatically means more scrutiny and eyes on the process. Having an approval chain in place means keeping track of all documentation associated with the payment request and spotting potential threats, like fraudulent requests from fake vendors.
• Compliance requirements: With great payments come great regulations. Complex payment requests often need to be reviewed by multiple individuals with compliance expertise. Using an approval chain here means making sure that the payments are being reviewed by all the relevant experts.
• Expense management: When an employee submits an expense report, it must be reviewed by different company stakeholders. An approval chain ensures that the expenses are being evaluated properly, and that employees aren’t being under- or overcompensated.
• High-risk payments: High-risk payments refer to any type of payment that carries an above-average amount of risk, whether in terms of the size of the payment being made, or how it’s being transferred. These types of payments require more attention. Using an approval chain means that all the right people are evaluating the payment as needed.

Approval chains in processing payroll

Approval chains are a big part of the global payroll process. This is especially true for organizations with global workforces. The bigger and more spread out a business is, the more circuitous the approval of the global payments process, with multiple checkmarks needed.

Payment distribution platforms can be a huge help in this context, navigating a complicated approval process by automating the process and keeping each stage of approval defined and organized.