Expense approval workflows for fast growing startups with stage appropriate rules and approver routing

Expense Approval Workflows: A Framework for Fast-Growing Startups

For a fast-growing startup, spending money often starts with a simple question on Slack to a founder. But as headcount and transaction volume grow, this ad-hoc approach quickly becomes a bottleneck. Expense requests stall, critical purchases are delayed, and a lack of clear oversight can lead to budget leaks. The challenge is learning how to set up an expense approval process that provides control without creating bureaucracy that slows the company down. The right workflow is not about rigid rules; it is about creating clarity and trust that allows your team to move quickly. This guide offers a stage-appropriate framework for building an approval process that scales from your first ten employees to your next funding round, ensuring financial discipline supports, rather than hinders, your growth.

The Foundation: Your First "Good Enough" Approval Policy (10-25 Employees)

At this early stage, the primary objective is clarity, not control. Your team just needs to know who to ask and when. The goal is to create a simple, low-friction system that prevents major unapproved spending without bogging everyone down in paperwork. A perfect, multi-layered policy is counterproductive; a "good enough" policy that everyone understands and follows is far more effective.

What founders find actually works is a single, clear rule. This often takes the form of a simple monetary threshold. For example, a common policy requires founder or CEO approval for any expense over a set amount like $500 or $1,000. For anything under that amount, the team is trusted to use their best judgment. This approach solves the immediate problem of "who do I ask?" for significant purchases.

Your tools can be simple at this size. Managing this process through email or a dedicated Slack channel is perfectly acceptable. The key is not a fancy system; it is a documented, consistently communicated rule. A pinned message in a #finance Slack channel can serve as your official policy document. You are establishing the foundation for financial accountability and creating a rudimentary audit trail, even if it is just a searchable history in Slack. This initial step is less about building a fortress and more about installing a simple gate.

The Tipping Point: When Ad-Hoc Approvals Start to Break (25-75 Employees)

Almost every fast-growing startup reaches the point where the simple, founder-centric approval process begins to crack. The signal to upgrade your system isn't failure, it's friction. You will notice key symptoms: expense requests get buried in a busy founder's inbox, delaying critical software purchases or marketing campaigns. Team members become hesitant to spend, unsure if their request was seen, leading to a slowdown in operational tempo. This is the pain point where an ad-hoc process transforms from a feature (speed) into a bug (a bottleneck).

As transaction volume increases, the risk of financial leakage grows. Without a formal review process, unauthorized or non-compliant spending can easily go unnoticed until the books are closed. According to the Association of Certified Fraud Examiners (ACFE) Report to the Nations, 2022, organizations with weak internal controls suffer greater financial losses. This is the moment when the absence of a clear audit trail transitions from a minor inconvenience to a significant business risk, complicating financial reporting and investor due diligence.

The reality for most scaling startups is more pragmatic: you do not suddenly need a ten-page expense policy. You need to evolve your process to distribute decision-making and formalize the capture of approvals. The trigger for change is when the pain of the current system outweighs the effort required to implement a more structured one. It is about moving from a system based on individuals to one based on roles and rules.

Designing Your Scalable Workflow: The Three Key Levers

A scalable expense approval workflow is built on three fundamental components. Understanding these levers allows you to design a process that fits your company's stage and culture, whether you are managing it through a spreadsheet or a dedicated spend management platform.

1. Approver Routing

This lever answers the question, "Who needs to approve this?" Instead of a single founder, you create a logical chain. The most common route is to the requester's direct manager, who has the best context on the team's needs and budget. For larger expenses or cross-functional spend, the request can then be routed to a department head or a finance lead. For a SaaS company, a new software tool might be approved by an Engineering Manager, while for a professional services firm, a project-related expense would go to the Project Lead. This distributes the approval workload and empowers budget owners.

2. Tiered Thresholds

This is the evolution of the single-threshold rule. Instead of one cap, you create multiple levels of approval based on the expense amount. This ensures the level of scrutiny matches the level of risk. A common structure is:

• Under $500: Direct manager approval only.
• $501 - $5,000: Requires approval from both the manager and the department head.
• Over $5,000: Requires approval from the manager, department head, and CEO or finance lead.

These tiers give team members autonomy for small, routine purchases while adding oversight for significant financial commitments. The specific amounts should reflect your company's cash flow and risk tolerance.

3. Policy Guardrails

These are the specific rules that define compliant spending, embedded directly into the workflow. This lever moves your policy from a static document to an active part of the process. Guardrails can include specifying preferred vendors, setting limits for categories like meals or software, or requiring receipts for all transactions. In modern expense reporting tools, these guardrails can be automated. For instance, modern corporate cards can be configured to automatically decline transactions that violate policy, preventing non-compliant spending before it happens and tying approvals directly to the point of sale.

Putting It Together: Common Startup Approval Models

How you combine the three levers depends on your company's size, complexity, and culture. Here are three common models that align with a startup's growth trajectory, helping you with managing employee expenses effectively.

1. The Seed Stage / "Founder Control" Model (10-25 Employees)

This is the foundational model. It uses a single approver (usually a founder or CEO) and a single threshold (e.g., more than $1,000). The primary lever is a simplified version of Tiered Thresholds. Approver Routing is static. This model is optimized for founder visibility and control when transaction volume is low. It is typically managed in Slack or email, and its main purpose is to prevent surprise five-figure bills.

2. The Series A / "Departmental Autonomy" Model (25-75 Employees)

As you scale, the founder bottleneck necessitates delegation. This model heavily utilizes Approver Routing and Tiered Thresholds. The department head or budget owner becomes the key approver for most expenses within their domain. A scenario we repeatedly see is a marketing associate requesting a $3,000 event sponsorship. The request automatically routes to their direct manager. Once approved, it then routes to the Head of Marketing, who has final sign-off authority against the marketing budget. The CEO is never involved, freeing up their time and empowering the marketing lead to execute their strategy.

3. The Series B / "Finance Oversight" Model (75+ Employees)

With a larger team and a more complex financial picture, a dedicated finance function enters the workflow. This model uses all three levers. Approval routes still start with the manager, but a finance approver is added for certain conditions: expenses over a high threshold (e.g., $10,000), specific categories like new software contracts, or capital expenditures. Here, the Policy Guardrails become more robust. For instance, the system may require a quote to be attached for any professional services engagement. This is also where geographic compliance becomes critical. The finance review ensures VAT receipts are correctly documented for UK companies using Xero, while US companies using QuickBooks focus on proper sales tax documentation. This model adds a layer of formal financial control.

From Slack to Software: Choosing Your Tools

The tools you use to manage approvals should also evolve with your company. While Slack and email work initially, they lack a formal audit trail and can become disorganized as volume grows. The next step for many is a shared spreadsheet, which offers more structure but is still manual and prone to error.

Eventually, scaling companies adopt dedicated software for digital expense approvals. These platforms formalize the process by creating automated workflows based on the levers discussed above: routing, thresholds, and guardrails. They provide a clear, centralized view of all spending requests, create an undeniable audit trail, and often integrate directly with corporate cards and accounting software like QuickBooks or Xero. This automation not only saves time but also enforces financial controls consistently, which is critical for scaling expense management.

Practical Takeaways for Scaling Expense Management

Building a robust process for managing team spending does not require a complex system from day one. The key is to implement a stage-appropriate workflow that can evolve. Start with the simplest possible system that provides clarity, typically a single approval threshold managed by a founder. Do not over-engineer it; email and Slack are sufficient at the beginning.

The signal to upgrade is friction. When approvals become a bottleneck and slow down the business, it is time to introduce more sophisticated levers like tiered thresholds and role-based routing. This transition from founder control to departmental autonomy is a natural and necessary part of scaling.

Your ultimate goal is to create a system with a clear, undeniable audit trail. This not only prevents budget leaks and ensures compliance but also streamlines financial closes and makes future due diligence processes smoother. By focusing on a "good enough" system that enables speed today while being adaptable for tomorrow, you can build the financial discipline needed to support sustainable growth. For more resources, see our expense management hub for templates and further reading.

Frequently Asked Questions

Q: What is a reasonable first approval threshold for a startup?

A: A common starting point is between $500 and $1,000. The right number depends on your cash flow and trust in your team. The goal is to give employees autonomy for routine purchases while requiring founder oversight for significant expenses that could impact your runway.

Q: How should we handle expense approvals when the manager is on vacation?

A: Your process should include a backup approver, often the vacationing manager's own boss or a designated peer. Modern expense reporting tools allow you to set up temporary delegation rules to ensure requests do not get stuck, maintaining business continuity without compromising control.

Q: Should our startup use personal cards for reimbursement or issue company cards?

A: While reimbursements are common early on, they can create cash flow issues for employees and administrative delays. Issuing corporate cards, especially modern ones with built-in spending controls, provides better visibility, automates expense capture, and helps in scaling expense management more efficiently.

Q: How does an expense approval process help with financial forecasting?

A: A formal approval process provides real-time data on committed spending before the cash leaves your account. This visibility into pending expenses, from software subscriptions to marketing campaigns, allows your finance team to create more accurate budgets and cash flow forecasts, which is critical for managing growth.