How to Build a Budget Approval Process that Scales with Your Growing Team

How to Build a Budget Approval Process that Scales with Your Growing Team

When a purchase request lands in your inbox, it often feels like just another distraction. But a stream of these requests signifies a deeper issue. Unclear team budgets and ad-hoc sign-offs via email or Slack do not just create noise; they introduce risk. This ambiguity leads to uncontrolled expenses, slows down critical hiring and marketing, and undermines the confidence of your board and investors.

The challenge is figuring out how to get team budgets approved in a startup environment without grinding everything to a halt. The solution is not about imposing corporate-style rules. It is about creating a system that gives your team the clarity and autonomy to move fast, while giving you the financial oversight to manage runway effectively. This guide provides a practical framework for building that system as you scale.

Foundational Understanding: The Goal Isn't Rules, It's Clarity

Before implementing any expense approval workflow, it is essential to answer the foundational question: what problem are we actually solving? Many founders mistakenly believe the goal is to control every dollar. In reality, the objective is to achieve three specific outcomes: clarity, accountability, and predictability.

Clarity means every team member knows what they can spend and who they need to ask for approval. This eliminates guesswork and enables them to make decisions quickly. Accountability ensures that spending is tied to specific individuals and departments, making budget reviews straightforward. Predictability gives you, the board, and your investors a reliable view of cash flow, which is crucial for accurate forecasting and runway management. For board-ready templates, see our guide on investor reporting.

What founders find actually works is viewing this process as an enabler of speed, not a source of bureaucracy. When your head of marketing knows their spending limit, they can launch a campaign without waiting days for your sign-off. When an engineer can buy a necessary software tool without a multi-step approval, they can get back to building. This is how you build effective financial controls for startups, making the process a strategic asset rather than a bottleneck.

The "Crawl, Walk, Run" Framework for Your Expense Approval Workflow

Startup budget policies must evolve with the company. Implementing a complex procurement system at the seed stage is a recipe for frustration. A more effective method is the "Crawl, Walk, Run" framework. This approach aligns your financial controls with your company's size and complexity, ensuring the process is always stage-appropriate.

Stage 1: The "Crawl" Phase (Pre-Seed to Seed, <25 Employees)

In the earliest days, speed and flexibility are everything. With a team of fewer than 25 people, the primary goal of your cost management process is to prevent surprise cash outlays without slowing down daily operations. At this stage, you and your co-founders are likely the only approvers. The system should be lightweight and built with the tools you already use, like company credit cards, Slack, and Google Sheets.

The reality for most Pre-Seed to Seed startups is more pragmatic: establish a simple pre-approved spending limit for every team member. A common threshold is $250. For any expense under this amount, an employee can make the purchase without prior approval, logging it in a shared spreadsheet. For anything over $250, a quick Slack message to a founder for a thumbs-up is sufficient. This provides a basic audit trail that can be reconciled in your accounting software later. For businesses using Xero, an app like ApprovalMax can add simple PO and approval workflows. This approach strikes the right balance, giving the team autonomy while keeping founders in the loop on significant expenditures.

Stage 2: The "Walk" Phase (Series A, 25-75 Employees)

As you grow to the 25-75 employee range, typically around your Series A, the founder-as-approver model breaks. Your time is better spent on strategic initiatives, and you have likely hired department heads to lead functions like marketing, sales, and engineering. The key question now becomes: how do we empower our new department heads in managing team budgets effectively?

The answer is delegation through a structured expense approval workflow. This is the stage to introduce your first formal approval matrix and consider a spend management platform like Ramp or Brex. These tools provide a clear system for requests and approvals and integrate with QuickBooks for US companies or Xero for UK startups. Department heads are typically given an approval limit between $2,500 and $5,000. This empowers them to approve vendor contracts, software subscriptions, and campaign spending for their teams without escalating to the C-suite.

A scenario we repeatedly see is a SaaS company hiring its first Head of Sales. By giving them a $5,000 approval threshold, the founder enables them to purchase essential sales tools like a CRM extension or data enrichment service, speeding up the team's ramp time. This clarity prevents the sales leader from becoming a bottleneck while still requiring founder approval for larger investments. Learn more about department-level budgeting for Series A teams.

Stage 3: The "Run" Phase (Series B+, >75 Employees)

Once your company surpasses 75 employees and raises a Series B or beyond, your financial processes require another level of maturity. At this scale, the goal is to ensure your spending process is scalable, predictable, and fully auditable. This provides critical budget oversight for founders, the board, and future investors.

This is where the finance function evolves from a bookkeeping role to a strategic partner. The focus shifts to implementing more robust financial controls for startups. Document a formal delegation of authority policy to clarify approval limits. A lightweight Purchase Order (PO) process is often introduced, requiring a PO for any significant spend before an invoice is paid. This provides a clear, upfront record of committed expenses, which dramatically improves forecast accuracy and demonstrates responsible capital deployment.

Tools become more sophisticated, including procurement platforms like Zip or Coupa that integrate with your core spend management system and eventually an ERP like NetSuite. A formal Procurement Policy is documented, outlining not just approval thresholds but also guidelines for vendor selection and negotiation. This robust framework provides the transparent audit trail necessary to maintain investor confidence as the company prepares for future growth stages.

How to Create Your First Approval Matrix and Set Team Spending Limits

Your first approval matrix doesn't need to be complicated. The goal is to create a simple, clear document that everyone in the company can understand. This matrix serves as the foundation for your team spending limits and defines ownership at each level. It directly answers the question, "What does an effective approval matrix look like?" For a startup in the "Walk" phase, the structure can be straightforward.

Consider this example for an e-commerce company managing marketing spend, supplier payments, and software costs:

• Individual Contributor (Up to $250): For routine expenses like a software subscription or office supplies.
• Department Head (Up to $5,000): For operational costs such as a new marketing campaign or a small vendor contract.
• VP / C-Suite (Up to $25,000): For significant investments like a larger software implementation or a key hire.
• CEO / Board ($100,000+): For major capital expenditures, such as a new office lease or significant equipment purchase.

This structure clearly delineates responsibilities. An Individual Contributor can buy a productivity tool without friction. A Department Head has the autonomy to execute their team's strategy. The VP and C-suite handle investments that impact multiple departments, while the CEO and board remain focused on company-defining decisions. This matrix should be documented, shared widely, and reviewed at least annually to ensure it still fits the company's needs.

Practical Takeaways

Implementing a budget approval process is a journey, not a one-time task. The key is to match the complexity of your system to the stage of your company. The "Crawl, Walk, Run" framework provides a clear path for scaling your financial controls without stifling the speed and agility that make startups successful.

1. Start with Clarity, Not Control: The primary goal is to provide your team with clear guidelines, not to micromanage every purchase. This fosters accountability and speed, solving for ambiguity and uncontrolled expenses.
2. Evolve Your Process: What works for a 10-person team will fail at 50. In the Crawl phase (<25 employees), use a simple $250 pre-approval limit. In the Walk phase (25-75 employees), introduce an approval matrix with department head limits up to $5,000. In the Run phase (>75 employees), formalize with a PO system to prevent operational bottlenecks.
3. Build Investor Confidence: A stage-appropriate process directly addresses the core pain points. It replaces ad-hoc emails with a scalable workflow, delegates approvals away from founders, and creates the transparent audit trail needed to secure and maintain investor confidence.

If you need a more flexible approach to planning, see our guide on rolling budget implementation. Your first step is to identify which stage you are in today. From there, define and document the corresponding approval thresholds. By taking a thoughtful, iterative approach, you can build an expense approval workflow that supports your company's growth. Start at our budgeting hub to map thresholds to your strategic milestones.

Frequently Asked Questions

Q: When should we move from the "Crawl" to the "Walk" stage?
A: The transition is typically driven by headcount (around 25 employees) and complexity. The key trigger is when founders become a bottleneck for approvals, slowing down operations. If you spend more time approving small expenses than on strategic work, it is time to delegate and implement a formal approval matrix.

Q: What is the difference between a spend management platform and a procurement tool?
A: Spend management platforms (like Ramp or Brex) focus on executing and tracking payments through cards and reimbursements. Procurement tools (like Zip or Coupa) manage the process before the spend happens, handling purchase requests, vendor approvals, and contract negotiations. In the "Run" stage, they often work together.

Q: How should our startup budget policies handle emergency spending?
A: Your policy should include a clause for urgent, out-of-process expenses. Define what constitutes an emergency and establish a clear, fast-tracked approval path, which might be direct approval from a C-suite member. The purchase should still be documented after the fact to maintain a clear audit trail.