Delegation of Authority Matrix: How to Set Approval Limits

As a business grows, founders can't approve everything, but someone needs to be accountable for each decision. A delegation of authority (DoA) matrix sets out who can approve what, and up to what amount. Done well, it speeds decisions up rather than slowing them down.

What a DoA Matrix Covers

• Capital expenditure and purchases.
• Operating expenses and vendor payments.
• Customer contracts, pricing and discounts.
• Hiring, salary changes and exits.
• Credit notes, write-offs and settlements.
• Borrowings, investments and bank account operations.
• Legal agreements and litigation.

How to Set Limits

1. List the decision types the business actually makes.
2. Look at the volume and value of each over the past year.
3. Set limits so routine items are approved at team or manager level, and only significant ones escalate.
4. Require two approvals, or a finance review, for higher-risk items like write-offs or related-party transactions.
5. Test the draft against real examples from recent months, and adjust.

Board and Shareholder Powers

Some decisions can't be delegated freely. Under the Companies Act, 2013, certain powers must be exercised by the board at a meeting — such as borrowing, investing funds, making loans, and approving financial statements — though some can be delegated to a committee or officer within limits set by the board. Some matters, like related-party transactions above thresholds or borrowing beyond specified limits, may also need shareholder approval. The DoA should sit within these rules, and the board should approve it.

Common Mistakes

• Limits so low that everything goes to the founder anyway.
• No rule for splitting orders to avoid limits.
• The matrix exists on paper, but banking and ERP approvals don't match it.
• No update when people or the business change.

Making It Stick

Build the matrix into systems: approval workflows in the accounting or procurement tool, and payment authorisation levels in the bank portal. Review it at least once a year.

Getting Help

Think Filing drafts delegation of authority matrices aligned to Companies Act requirements, and helps configure them in your systems.