6 Ways to Manage Maverick Spend
By Mackenzie Oakley | February 17, 2021
- Extra processing time – Maverick spend confuses accounting departments who must take the time to try to make sense of inconsistent invoices and payments with no corresponding purchase order.
- Fraud – When procurement isn’t overseeing purchasing, the chance of fraud increases.
- Compliance and risk concerns – Employees might buy unauthorized products or parts, which could violate existing contracts or breach health and safety policies.
- Cost – Maverick spending can cost the business millions of dollars every year.
- Wasted time – The time procurement professionals spend addressing maverick spend could be better spent on value-adding projects.
How to manage maverick spend
In some organizations, maverick spend can amount to as much as 80% of all spend. Here are six ways to manage out of control maverick spend in your organization.
Invest in an e-procurement system
Adopting a centralized solution for managing all P2P purchases can significantly reduce maverick spend. It encourages all employees to utilize the same system, which makes it easier to manage purchase requests through the correct channels.
However, while especially beneficial for employees who are catalog buying consumable items, it won’t eliminate maverick spending altogether. E-procurement systems can be expensive to upkeep and difficult to implement, working most effectively when integrated slowly into a mature organization.
Take responsibility for contract implementation
A common mistake procurement professionals make is to assume “somebody” will follow through once a contract has been signed. Most sourcing processes name “implement contract” as the final step but don’t clearly define who is responsible for implementing new contracts. If you’ve negotiated a new contract with a supplier, make sure you take accountability for following through with ongoing performance management.
Establish clearly defined purchasing roles
If you were to do a little investigating, you may uncover a whole load of wannabe procurement professionals lurking within your organization. These are the people who will happily take matters into their own hands, contacting suppliers, negotiating costs and completing purchases without following business procedures or involving procurement. If everyone within an organization has the authority to complete purchases, there’s little chance of getting maverick spending under control.
Review permissions and purchasing authorities within your organization, and leverage the power of procurement systems to set limits and lock out (as much as possible) maverick spending.
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Design tailor-made P2P processes
Business purchases come in all different shapes and sizes, and so it figures that there can’t be a singular approach to your P2P process. When implementing or updating your processes, try to accommodate the different types of purchasing that go on in your organization and the different employees doing the purchasing.
Insist on purchase orders
The “big stick” approach to maverick spend is to enforce a “no purchase order, no pay” policy.
CIPS estimates that approximately 90% of all purchases can be raised on a purchase order (the remaining 10% would include purchases such as subscriptions, utilities, or employees’ personal expenses). The benefit of this is that it guarantees spend is reviewed before it is confirmed.
Manage maverick spend by educating the organization
More than three-quarters of procurement leaders claim that the leading cause of maverick spending within their organization is due to employees believing their purchases are too small to have any real impact. For this reason, it’s important to communicate the importance of procurement policies and centralized systems, as well as the fact that it’s not only the “big buys” that impact the organization’s bottom line.
Another reason for maverick spending is that employees can genuinely believe they are getting a better deal on a purchase such as a flight or hotel stay. In this case, procurement should make them aware of the bigger picture, such as how their action invalidates the bulk discount negotiated with a travel provider.
Once you’ve communicated the existence and purpose of your procurement systems, make sure they are actually accessible and easy to use.
Finally, it’s no use implementing all of these measures if you’re not going to measure your progress. Compliance should be measured on at least a monthly basis and cases of maverick spend addressed as you go along.
Good luck with tackling your mavericks!
Need to control maverick spenders while saving money, time, and effort in the process? Una can help, contact us today.