How to Set Up Procurement Controls Without a Procurement Team for Startups

Procurement Controls Without a Procurement Team

When a company grows from a founder's vision into a team of ten, the way money is spent begins to change. The single company credit card, once a tool of speed and agility, starts to create friction. Surprise software subscriptions appear on the monthly statement, and tracking who bought what becomes a time-consuming forensic exercise. This is the moment when the need for internal controls emerges, not to slow things down, but to ensure every dollar spent is intentional and aligned with company goals. The challenge is building just enough process to gain control without introducing the corporate bureaucracy that startups are built to avoid. This guide explains how you can begin controlling spend in early-stage companies before you have a dedicated finance department.

Foundational Understanding: Why and When to Add Spending Controls

The shift from informal to formal spending oversight is triggered by scale and complexity, not a specific date on the calendar. The need for spending controls typically emerges when a startup reaches 10 to 15 employees. At this size, communication is no longer seamless, and a founder cannot personally oversee every transaction. The tipping point often occurs around 15 to 20 employees or when non-payroll spending exceeds a threshold like $25,000 per month. These are signals that ad-hoc methods are no longer sustainable.

The goal is intentionality, not bureaucracy. Introducing lightweight controls early prevents budget overruns, reduces fraud risk, and frees up leadership to focus on growth instead of chasing down receipts. For companies in sectors like biotech or deeptech, where initial capital expenditure on equipment can be high, these controls are vital from day one. For SaaS or professional services firms, the trigger is often the rapid accumulation of recurring software licenses. Establishing this discipline also sends a powerful signal to investors during due diligence that the company is managed responsibly. It’s about building a scalable foundation for financial discipline.

Taming Ad-Hoc Spending: A Simple Procurement Workflow for Vendor Approvals

To stop surprise bills, you need a clear and simple process for approving purchases before they happen. This provides visibility and ensures every expense aligns with your budget and strategic priorities. The foundation of this system is a defined threshold that separates routine purchases from significant financial commitments.

Establish a Materiality Threshold

A Materiality Threshold is the dollar amount above which a purchase requires formal approval. This empowers your team with autonomy for smaller, necessary expenses while maintaining oversight on larger ones. A common threshold for early-stage companies is any single purchase or new recurring subscription over $500. For anything below this amount, team members can make the purchase, trusting their judgment. For anything above, the approval process kicks in. This figure can be adjusted based on your industry; a hardware-intensive company may set a higher threshold than a services business.

Implement a Two-Tier Approval Matrix

What founders find actually works is a simple, tiered system that distributes responsibility and prevents bottlenecks. A Two-Tier Approval Matrix is a practical starting point for expense authorization for small teams. It clarifies who can approve what, supporting segregation of duties even in a small finance function.

• Tier 1: Purchases under $2,500. These generally require approval from the team lead or department head who holds the budget. This empowers managers to procure the resources their teams need without escalating to senior leadership. For example, a marketing manager approving a new $600 per month analytics tool subscription falls into this tier.
• Tier 2: Purchases over $2,500. Larger expenditures that have a more significant impact on cash flow should require sign-off from a Founder or Finance Lead. For instance, an engineering lead needing to purchase a specialized software license for $7,000 would require approval at this level.

Use a '1-Hour Fix' to Document Approvals

Implementing this doesn't require complex software. It can start today as a '1-Hour Fix' in a tool you already use, like Slack. Create a dedicated channel, such as #purchase-requests, where all approval requests must be submitted. This creates a documented, searchable record of every request, discussion, and approval, which is invaluable for bookkeeping and audits. An effective request should be structured and concise.

A simple Slack request template can ensure all necessary information is provided upfront:

• What is it? (e.g., Asana Business subscription, annual plan)
• Why do we need it? (e.g., To manage the Q3 content marketing launch and track cross-functional dependencies)
• How much does it cost? (e.g., $1,500 for the year, including taxes)
• Who is the approver? (e.g., @marketing-lead)

This simple procurement workflow creates a culture of accountability and makes spending visible and intentional. It is the first step in learning how to manage vendor approvals without dedicated procurement and effectively stops surprise bills without slowing the team down.

From Spreadsheet to System: 'Good Enough' Vendor Management

Knowing what you're buying is only half the battle; knowing who you're paying is critical for compliance and risk management. Without a central place to track vendor information, your team is exposed to compliance gaps, operational risks, and a frantic year-end scramble for tax forms. The solution is a Central Vendor List, a '1-Day Project' that can be built in a Google Sheet or Airtable. This becomes your single source of truth for managing suppliers without procurement.

Build a Central Vendor List

Your vendor list doesn’t need to be complex. It should capture the essential information required for financial operations and compliance. Start with these key fields:

• Vendor Name: The legal name of the business, as it should appear on invoices and tax forms.
• Primary Contact: The name and email for your main point of contact for billing or service questions.
• Service Provided: A brief, clear description of what they do for you, such as "SEO consulting services" or "Cloud data warehousing."
• Payment Terms: How and when they are paid, like Net 30, upon receipt, or via credit card. Specify the payment method, such as ACH or wire.
• Tax Form on File: A simple 'Yes/No' or date field to confirm you have the necessary documentation.
• Approval Date: The date the vendor was formally approved for use, linking back to your approval process.

Enforce a 'No W-9, No Payment' Rule

This central list directly supports a major compliance requirement. For US-based contractors and vendors, a signed W-9 form must be collected before any payment is made to comply with 1099 filing requirements at year-end. This leads to a non-negotiable rule: 'No W-9, No Payment'. Making this a mandatory step in your vendor onboarding process prevents significant headaches and potential IRS penalties.

For UK companies, the equivalent consideration often involves verifying a contractor's employment status for tax purposes, which relates to IR35 rules. You must confirm whether the contractor should be treated as an employee for tax purposes. Establishing this documentation process is a key part of any effective vendor approval process. See our comprehensive guide to Internal Controls for US Startups for more details.

From Invoice to Insight: A Lean Accounts Payable Process

Founder time is your most valuable resource, yet it is often wasted on manual, repetitive tasks like processing invoices. Reconciling payments in QuickBooks or Xero without a clear process leads to inaccurate cash-flow forecasting and hours spent on administrative work. The first step to reclaim that time is to centralize and structure your accounts payable (AP) workflow.

Create a Centralized Invoice Inbox

Establish a single, dedicated email address, such as invoices@yourcompany.com, and instruct all vendors to send their bills there. This simple change prevents invoices from getting lost in personal inboxes, clarifies ownership for AP management, and creates an organized queue of bills to be paid. It also lays the groundwork for future automation, as many spend management platforms can connect directly to such an inbox.

Adopt a Lightweight '3-Way Match'

Before any bill is paid, it must pass three simple checks. This disciplined process, a startup-friendly version of the corporate '3-way match', ensures every payment is legitimate, approved, and accurate.

1. Was the purchase approved? Check your approval record, such as the Slack channel or email thread, for the corresponding request. This confirms the expense was authorized and budgeted for.
2. Is the vendor legitimate? Confirm the vendor exists in your Central Vendor List and that their tax and payment details are on file and match the invoice. This is a crucial defense against fraud, such as phishing attacks where criminals impersonate vendors.
3. Is the invoice correct? Does the amount, service description, and date match what was originally approved? This check prevents overpayments, duplicate payments, or paying for incorrect services.

This structured process is more than just good housekeeping. According to the Association for Certified Fraud Examiners (ACFE), billing and payment schemes are a major fraud risk for small businesses. A clear approval and payment workflow is your primary defense. In practice, we see that this discipline transforms accounts payable from a chaotic chore into a source of valuable data for financial planning.

Initially, this process can be managed manually within your accounting software like QuickBooks or Xero. As your company scales toward Series A or B and your transaction volume increases, you can graduate to platforms like Ramp, Brex, or Bill.com that automate invoice intake, approvals, and payment. But the foundational logic remains the same. Learning how to manage vendor approvals without dedicated procurement starts with these simple, manual steps.

Practical Takeaways: Implementing Your Startup Purchasing Policies

Implementing financial controls doesn't have to be an overwhelming project. The reality for most early-stage startups is more pragmatic: start small and layer in complexity as you grow. You can begin building a robust system for managing spending with a series of tiered, manageable projects.

• The 1-Hour Fix: Create a Slack channel for purchase approvals and define your materiality threshold. This immediately brings visibility and intentionality to new spending.
• The 1-Day Project: Build a Central Vendor List in a spreadsheet. Mandate that all new vendors are added and all necessary tax forms, like the W-9 in the US, are collected before the first payment is processed.
• The Next Level: Once manual processing takes more than a few hours per week, evaluate modern spend management platforms. These tools integrate approvals, vendor management, and payments directly with your accounting software, significantly reducing administrative overhead.

Formalize Your Process in a One-Page Policy

To embed these new habits into your company culture, document them in a simple, one-page 'Spending & Vendor Policy'. This isn't a 50-page legal document; it's a clear guide for your team that promotes responsible spending and operational efficiency.

Your one-page policy should outline:

• Our Spending Philosophy: A brief statement on the importance of spending company money wisely to fuel growth.
• The Approval Process: Clearly define the materiality threshold and the two-tier approval matrix.
• How to Submit a Request: Point employees to the correct Slack channel and provide the simple request template.
• Vendor Onboarding: Explain the 'No W-9, No Payment' rule (or UK equivalent) and the requirement to add new suppliers to the central list.
• Invoice Submission: Direct all vendor invoices to the central invoices@ email address to ensure proper processing.

By taking these concrete steps, you create a system for how to manage vendor approvals without dedicated procurement that scales with your startup. This provides the financial control investors expect and the operational clarity you need to manage your runway effectively. Continue at the Internal Controls hub to learn more.

Frequently Asked Questions

Q: At what stage is a dedicated procurement person necessary?
A: Most startups don't need a dedicated procurement role until they reach significant scale, typically 75-100+ employees or have complex supply chains. Before that, the processes outlined here, managed by a finance lead or controller, are sufficient for controlling spend in early-stage companies.

Q: How do these controls apply to recurring software subscriptions?
A: All new recurring subscriptions should go through the standard approval process. It's also critical to conduct a quarterly review of all subscriptions to identify and cancel unused software, as this is a common source of budget leakage in SaaS and tech companies.

Q: What is the biggest mistake startups make with early procurement?
A: The most common mistake is waiting too long to implement any process. Founders often prioritize growth above all else, but a lack of basic controls leads to surprise bills, wasted spending, and a difficult clean-up process later on, which can delay fundraising or an audit.