Managing Purchase Requisitions with Spend Guard
Does your organization have non-zero requisition approval limits? Have you ever worried about employees trying to circumvent these limits by splitting what should be one requisition into multiple smaller requisitions?
Usually, these self-approval limits differ by role and the requester’s position in the organization. For example, an employee or manager may be able to self-approve a spend amount up to $10,000, while amounts above that but below $100,000 may need an approval from one or two levels up. Very large spends (above $100,000 in our example) may need approval from the CFO or CEO, or maybe require a sourcing event to be run.
What are split requisitions?
Let's start with understanding exactly what splitting requisition means. In the simplest terms, it is when a large requisition is divided into multiple, smaller requisitions which are individually below a specific approval threshold. To use our example from above, if we don’t want the spend to require approval by the CFO, we might split a $180,000 requisition into two $90,000 requisitions.
Splitting the requisitions bypasses the approval processes put in place. This causes a breakdown in the approval hierarchy, allowing non-compliant purchases and making it harder to control spending. It may also increase shipping costs and reduce bulk discounts. Or, it could be a sign of fraud going unnoticed. Concern around misuse of self-approval limits has held some customers back from using them.
Spend Guard: Using spend management for requisitions
So how can Coupa help? In May 2021, based on the demand for insight into this suspicious behavior from the Coupa Community, Coupa introduced a new alert into Spend Guard to detect users who are splitting requisitions. Spend Guard is our product for monitoring and finding errors and fraud in spend. (Another example of a valuable Spend Guard alert is duplicate invoices.)
The split requisitions alert looks for the following cases of splitting requisitions:
- An employee self-approving a requisition under his or her self-approval limit. This is the simplest case mentioned in the examples above. For higher accuracy we filter out false positives such as recurring invoices by the employee, when the user has a role which requires him or her to order multiple things on demand.
- An employee colludes with his or her manager to get requisitions approved under the manager’s self-approval limit. We start by creating a hierarchy tree and checking each self-approved requisition with the approval limits of the user who requested it as well as their manager. Usually collusion is a big concern for companies when it comes to fraud, and it can be incredibly complex given that multiple people are involved. Spend Guard monitors for employees colluding with suppliers and delivers sourcing alerts for suspicious behavior.
- An employee splitting a requisition whose value was above a certain global threshold set by the organization. For example, if the requisition amount is more than $100,000 (the global threshold set up by an organization) and we find that it is a split requisition, then we can put the transaction in this category, giving it a higher priority.
To date our customers have identified over $7 million in split requisitions, all in a matter of a few months. This alert has allowed customers to quickly address purchase requisition issues and rectify non-compliant behavior, non-compliant spend from going out the door. Customers are able to see any non-compliant practices among employees and can take appropriate action.
Monitoring for split requisitions using artificial intelligence allows you to gain control over your approval processes and feel confident using self-approvals. In the spirit of ensuring customer success, Coupa Spend Guard values at multiple stages of your Business Spend Management journey.