How to set up a purchase order system that prevents maverick spending

Maverick spending — purchasing outside approved processes, vendors, or budgets — is one of the most common financial leakages in growing Indian companies. It happens because the procurement process is either nonexistent or so cumbersome that people bypass it. The solution is a process that's controlled without being slow.

Define what requires a purchase order. Not every small purchase needs a PO — that creates unnecessary overhead. Set a threshold (commonly ₹5,000–10,000) above which a PO is required. Below the threshold, a petty cash or expense reimbursement process applies. Anything on recurring contracts doesn't need individual POs — it needs a blanket order reviewed quarterly.

The PO process should have three steps: requisition (the requester states what they need and why), approval (their manager and finance approve within a defined SLA), and issuance (procurement issues the PO to the vendor). Define who can approve at what level — a department head can approve up to ₹50,000; above that, it goes to the CFO or founder. Make the levels explicit.

Maintain an approved vendor list. Purchasing from unapproved vendors should require a specific exception approval. This prevents one-time vendors from becoming recurring relationships without evaluation, and ensures you maintain quality and compliance standards.

Three quotes for new or large purchases. For any purchase above a threshold (set this based on your business — commonly ₹25,000–1,00,000), require quotes from at least three vendors. This keeps pricing competitive and documents the decision. It doesn't have to be onerous — email quotes from three vendors takes 30 minutes for the requester.

Match PO to invoice before payment. Every vendor invoice above the PO threshold should be matched to an approved PO before payment is authorised. If there's no PO, there's no payment until one is retroactively approved (with explanation). This single control prevents a significant portion of unauthorised spending.