6 Ways to Manage Maverick Spend
By Mackenzie Oakley | February 17, 2021
The average maverick in your organization probably isn’t a sunglass-wearing, motorcycle-riding, plane-flying daredevil with the dashing good looks of Tom Cruise.
Chances are, they’ve simply put in a big stationary order with an unapproved vendor and added yet another incremental loss to your company’s profits.
Maverick spend is defined as purchases made outside of procurement guidelines and policy, either accidentally or intentionally. Procurement professionals are all too aware of the negative impact this can have on the organization.
- 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 spend 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.
Controlling maverick spend isn’t just about cost. For example, your organization may have publicly committed to move away from sourcing products containing palm oil, but a maverick might undermine this effort by placing an unapproved order with a supplier still using unsustainable palm oil in their products.
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.