Five Ways to Combat Maverick Spend
One of the most significant challenges organizations face is ‘maverick spend’ – a term used frequently in the procurement industry to describe spending that hasn’t been approved by the central procurement team or sanctioned by a relevant budget holder.
With spend control in mind, many organizations have procurement policies. Suppliers are vetted and selected on a range of criteria to ensure businesses obtain cost-effective and ethical goods. These suppliers are promoted as preferred sources for buyers in the organization for certain categories of spend.
Maverick spending can undermine all of this. Understanding the meaning of maverick spend is crucial to control spending. Individuals in the company can circumvent procurement and create relationships with suppliers on their own.
However, more than often, this can be detrimental to the business. It can undermine relationships procurement has worked hard to establish and cost organizations more money and reputation in the long run. Consider five ways to combat maverick spend and gain control over the bottom line.
#1 – What is the meaning of maverick spending?
Spotting maverick spend is the first priority to get spend control. Without the appropriate visibility of what your business is spending and who is spending it, you won’t be able to tackle maverick spending.
Start by conducting a thorough spend analysis to identify unexpected spending, for example, spend with unknown suppliers, by people without (enough or any) budget authority, or even in spend categories that bear no relevance to a buyer’s departmental function or role.
Often procurement teams use spend analysis tools to help them aggregate the data for meaningful analysis - after all, you can’t stop what you can’t see. When you’ve collated this information, it’ll be simpler to identify maverick spending and devise a plan to tackle it.
#2 – How do I control maverick spending?
In our years of supplying procurement solutions, most people don’t go rogue deliberately. Usually, there is a compelling reason for staff to contravene spending best-practice.
So, empathize with your staff. Ask yourself and your buyers questions such as:
- Do you fully understand our procurement process?
- Is our procurement process long-winded or frustrating?
- Are we actually getting the best prices or best service in our areas of spend?
- Is the eProcurement solution you’re using complicated? Do you need to run training sessions?
- Can you find what you need easily in procurement? Can you easily request something you cannot find?
Exploring all these options can go a long way to identifying who is responsible for the maverick spending in your organization and what you can do to resolve it.
#3 – Why is spend management important?
Counting pennies shouldn’t be isolated to procurement. Fostering a culture of accountability, where all departments are responsible for their own spending is key to ensuring maverick spend doesn’t become an issue.
Each manager should know what is being spent within their department, by how, and how that spend looks against pre-arranged contracts as well as budgets.
Challenge managers on their knowledge and awareness of how much money is being spent within their team. And if they’re struggling to track this spend, consider points from our next tip.
#4 – Clearly define roles in the business
One of the trickiest areas of maverick spend centers around clearly defining who does what in the business.
Many employees prefer trying to call suppliers themselves to negotiate a deal and then buy. And unfortunately, it is this action that leads to uncontrolled maverick spend and potential risks around fraudulent suppliers or inconsistent or poor supply. For clarity, set up a list of agreed purchasers with spend limits that can buy for the business.
Define clear spend authority limits for all your buyers, with further approval needed once those limits have been exceeded. This process should be the only way of buying in the business.
Combine this with enforcing purchase orders for any approved spend requests, with buyers understanding that ‘no PO means no pay’ and you are on the way to eliminating a rogue spending culture.
By giving purchasers the correct systems and processes to support their buying you can easily make all their requisitions compliant.
#5 – Make your procurement process electronic
Many procurement teams have turned to eProcurement solutions to address the challenges posed by maverick spend. Medius Spend Management, just one of many eProcurement solutions available on the market, is adept at helping organizations understand their buying and combatting a spend culture.
Medius Spend Management is an easy-to-use solution to find what you need. These systems are frequently called purchase-to-pay or procure-to-pay suites (P2P).
And the best thing – our Spend Management Software can readily integrate with a multitude of ERP systems, enabling spend and supplier data to be fed back and forth, giving finance and procurement professionals a better view of all spend data.
Maverick spend is a real challenge for businesses all over the world. If it isn’t spotted and stamped out quickly, it can cause significant problems to the financial health of your business. Automation ensures organizations detect maverick spending before it becomes a consequential loss.
