Expense Approval Matrix: a practical 'who-approves-what' guide for growing startups

Why a Founder Bottleneck Stifles Growth

As a founder, you are the engine of your company, but you can also become its biggest bottleneck. When every software subscription, marketing campaign, and travel booking has to cross your desk, growth slows to a crawl. Vendor payments get delayed, time-sensitive projects stall, and your team is left waiting for a green light. This isn't just inefficient; it creates a culture of dependency where no one feels empowered to make decisions.

Without a clear system, you face two equal dangers: uncontrolled spending from ambiguous rules, or operational paralysis from an over-centralized process. Both scenarios drain your most valuable resource: time. Establishing a clear startup expense approval process isn't about adding bureaucracy. It is about empowering your team to move faster while maintaining financial control and building a scalable foundation for growth.

What Is an Expense Approval Matrix?

An expense approval matrix is a simple framework that documents who is authorized to approve company expenses up to certain monetary thresholds. Think of it as a 'who-approves-what' guide for your entire organization. Instead of every request going to a founder or the finance team, the matrix delegates approval authority based on an individual's role and the size of the expenditure. It clearly defines spending limits by role, creating predictable approval workflows for startups.

This document is a fundamental part of an effective startup expense policy. It transforms the expense authorization process from an ad-hoc, verbal system into a documented, consistent one. For US companies, this provides a clear internal control framework under US GAAP. For UK startups, it supports the financial governance expected under FRS 102. By formalizing the process, you create an auditable trail that gives investors confidence and simplifies financial reviews.

When Do You Need a Startup Expense Approval Process? The Tipping Point

Founders often mistakenly tie the need for formal financial controls to a funding round or a specific revenue milestone. The reality for most early-stage startups is more pragmatic: the trigger is team size and structure. The founder-as-approver model works for a small, tight-knit team, but it breaks once you begin hiring managers and department leads.

Your first Head of Sales or Director of Engineering needs the autonomy to equip their team without waiting for your sign-off on every purchase. The tipping point for needing a matrix is typically around 15-25 employees. At this stage, communication becomes more complex, and the sheer volume of small purchases starts to create significant administrative noise for the leadership team.

Inconsistent or undocumented approval rules at this size create real risks. They invite confusion, can lead to accidental overspending that burns through runway, and create challenges during due diligence or audits. Establishing a formal process demonstrates operational maturity to investors and builds a culture of accountability. The goal is not to restrict spending but to channel it efficiently through the right people. It replaces the single point of failure with a distributed system of ownership, which is essential for scaling finance processes. As your team grows, you can formalize the segregation of duties even further.

A Baseline Approval Matrix for Early-Stage Startups

Creating your first approval matrix should prioritize simplicity and clarity. The goal is to cover over 90% of your company's routine expenses without creating a complex system that nobody uses. This structure is a foundational element of financial controls for early-stage companies, designed to be managed in a spreadsheet or a basic spend management tool like Ramp or Brex. These platforms often integrate directly with your accounting software, such as QuickBooks or Xero, to streamline reporting.

A typical baseline structure ties approval limits directly to seniority. This empowers individuals to make decisions appropriate to their level of responsibility. Here is a common starting point for a company with under 50 employees:

• Individual Contributor: Up to $250. This level covers small, individual purchases like specific software tools, professional development courses, or minor travel expenses. The low threshold empowers employees to get what they need for their job without friction but limits financial risk.
• Manager / Director: Up to $2,500. This tier is for leaders responsible for team-level expenses. Examples include software licenses for their direct reports, small project budgets, or team event costs. This limit allows them to manage their team's operational needs effectively.
• VP / Department Head: Up to $10,000. This level is reserved for senior leaders who oversee significant departmental expenditures. This includes larger vendor contracts, major software platform purchases, and marketing campaign budgets that have a broader impact on the business.
• CEO / Founder: Required for amounts over $10,000. The CEO or founder retains approval authority for the largest and most strategic expenditures. This includes anything with a material impact on the company's finances, such as annual commitments, key vendor selections, or unbudgeted capital expenditures.

This structure ensures most day-to-day spending is handled by team leads who have the most context, freeing up the CEO to focus on high-impact strategic decisions. It provides a direct answer to the question of who approves company expenses in a clear, documented way.

Handling Special Cases: Beyond Standard Expenses

Not all expenses fit neatly into a single purchase amount. SaaS subscriptions, marketing campaigns, and long-term contracts require a more nuanced approach to approval. Your startup expense policy must account for these scenarios.

SaaS and Recurring Contracts: Approving Total Contract Value (TCV)

A critical distinction for any subscription-based cost is approving the total commitment, not just the first monthly payment. A $500 per month software tool seems like a small expense, but a 12-month contract represents a $6,000 commitment. Your approval matrix should apply to this Total Contract Value (TCV).

As a rule of thumb, any contract with a commitment over three months should be approved by a VP or the CEO, regardless of the monthly payment amount. Consider a SaaS startup that wants to sign up for a new project management tool. The cost is $1,000 per month on a 12-month contract. While the monthly cost of $1,000 is within a Director's approval limit of $2,500, the TCV is $12,000. According to the baseline matrix, any amount over $10,000 requires CEO approval. The Director must therefore escalate the request to the CEO for a final sign-off, ensuring leadership has visibility of the full financial commitment.

Marketing Campaigns and Variable Spend: The Budget Envelope

For variable spend like digital advertising, it is impractical to approve every individual ad placement or keyword bid. Instead, the approval should focus on the total budget for the campaign or a specific time period. A VP of Marketing might get approval for a $30,000 quarterly budget for paid ads. This creates a budget "envelope."

As long as the team's spending stays within that pre-approved total, they do not need to seek approval for every transaction. This empowers them to optimize the campaign in real-time by reallocating funds between channels based on performance. For guidance on managing these types of budgets, you can review guides on procurement controls for lean teams.

Evolving Your Matrix: What to Do Post-Series A

As your company grows, particularly after a Series A financing, your startup expense approval process must mature alongside it. With a larger team, more complex departments, and significant capital to manage, the focus shifts from pure delegation to strategic budget alignment. This is typically when you hire your first dedicated finance leader, such as a Head of Finance or Controller.

This new role fundamentally changes the approval dynamic. The key evolution is the introduction of a second level of approval for larger expenditures to ensure they align with the company's financial plan. Post-Series A, a finance leader often becomes a required second approver for large expenses, for example, anything over $25,000. This is not about adding bureaucracy; it is a critical check to confirm that a proposed expense fits within the departmental budget approved by the board.

Your matrix logic becomes more sophisticated. For example, an evolved matrix might state that a VP can approve up to $15,000, but anything over $5,000 also requires a finance check. This ensures the department head confirms the operational need while the finance leader confirms the budgetary capacity. This dual-approval workflow is a critical step in building robust financial controls and provides investors with confidence that you are managing their capital responsibly. A scenario we repeatedly see is companies formalizing this two-step process in their spend management software to automate the routing and documentation.

Practical Steps to Implement Your Approval Matrix

Implementing an expense approval matrix does not need to be a disruptive, top-down mandate. The key is to introduce it incrementally to build trust and demonstrate its value in reducing friction for the entire team.

1. Start Small and Build Confidence. An effective way to begin is with a pilot program. Start with approvals under $500. Give managers the ability to approve these small, routine expenses and observe how the process works. This proves the concept and builds comfort with delegated authority without introducing significant financial risk.
2. Document the Policy and Communicate Clearly. Your matrix should live in a shared, accessible location like a company wiki or shared drive. When you introduce it, explain the "why" behind the change. Frame it as a move to empower teams and accelerate decision-making, not to add red tape. Clear communication prevents the policy from being seen as a loss of trust.
3. Leverage Your Existing Tools. A simple Google Sheet can serve as your first matrix. As you scale, platforms like Brex, Ramp, or Bill.com can automate these approval workflows. These tools, which work with systems like QuickBooks and Xero, create an auditable trail without manual effort. The goal is a system that supports growth, rather than slowing it down, by making financial accountability a shared responsibility.

Frequently Asked Questions

Q: What is the difference between an expense policy and an approval matrix?
A: An expense policy outlines the rules for what the company will pay for, defining acceptable and unacceptable spending categories. The approval matrix complements this by defining who has the authority to approve those expenses and up to what monetary value, creating a clear workflow.

Q: How often should we update our expense approval matrix?
A: You should review your matrix at least annually or after a significant business event. Triggers for an update include closing a new funding round, significant headcount growth, or a restructuring of departments. The goal is to ensure the thresholds and roles remain relevant to your current scale.

Q: What happens if an urgent expense exceeds someone's approval limit?
A: Your startup expense policy should define a clear escalation path for emergencies. Typically, the request should be escalated to the next highest approval level. If that person is unavailable, the process should designate an alternative, such as the CEO or Head of Finance, to prevent bottlenecks.

Q: Can we use a spreadsheet for our startup expense approval process?
A: Yes, a spreadsheet is a perfectly acceptable tool for an early-stage company. It is simple and easy to maintain. However, as your transaction volume grows, automated spend management platforms can reduce manual errors, enforce policies automatically, and provide a much clearer audit trail.