What are the causes of maverick spending in procurement?

The elimination of maverick spending is a key priority to all procurement and supply chain professionals to make sure businesses stay aligned with purchasing strategy and have full visibility of their spend.  

Procurement Magazine rounds up the best advice in the market from major procurement solutions about the reasons for maverick spend, and how to avoid it. 

JAGGAER

In their insight blog, JAGGAER recommends five tips to maverick-proof your processes

Identify maverick spend

By having visibility, you have the ability to fix the issues, as you can’t fix what you can’t see.  Having a full view of where the spend is happening allows you to put an action plan in place.

Determine why maverick spend occurs

Many maverick spenders may simply not understand the process, and the costs involved of not following the agreed strategy.  Regular efforts to explain why processes are in place can increase buy-in. 

Review the entire procurement process

If your eProcurement system is complicated or difficult to use for staff, it may be time to review it.  Having one that integrates with your ERP system is important. 

Hold people accountable for their expenses 

By making sure responsible managers are held accountable for spend in their department, is can increase buy-in to the correct procedures and the savings they can bring.  

Close the gaps in your procurement process

Other measures can include limiting P-card use, limiting who can set up new vendors on the system and a C-level review of non-contract or outside supplier spend.  

Read JAGGAER’s white paper on taking control of indirect spending.  

Tipalti Approve

Tipalti Approve break down in an online blog why it is vital to control spending, as inefficient maverick spending may undermine work done to create savings and advantages by a procurement operations.

Missing out on savings that may have been secured in carefully constructed contracts

Reduced quality control, if goods or suppliers have not been fully researched they may not be of the right quality.

Loss of trust with vendors can result in potential breaches of contract. There are also risks of regulatory non-compliance when you work suppliers who aren’t known to the organisation.  

Wasted time for back office functions who have to do additional financial work to understand spending and changes to budgets. 

Inaccurate budgeting, can be caused by maverick spend, as the uncontrolled spend may go against budget constraints or agreements.  

SpendHQ

In a recent guide, SpendHQ break down five reasons why maverick spending may continuously happen. 

Confusing and inefficient procurement processes

New digital procurement systems may seem difficult to use to departments who may not have regular contact with it, which will mean there can be a transition period.   If the process takes them longer, they may feel it is more productive to step outside of the normal process and adopt maverick spending.

One-time purchases 

A one-off purchase may not seem a big issue for an individual or a department, but it can add up to a much larger problem. Multiplying this situation across a great many departments can result in a large amount of savings leakage. 

Overlapping contracts

Despite the need for having depth in supply chains, it can be a risk to have over-lapping contracts, as it can mean a variety of prices being paid for the same goods or service.  Because some contracts can exist in different systems within a business, some can lose money while think they actually have control and visibility.

Lack of stakeholder buy-in

If all levels of a business don’t buy into the strategy, it can mean people with buying power will continue to maverick spend as they know they won’t be challenged.   It means it is vital for CPOs and procurement departments to communicate well with other executives.

No organisational accountability

Most maverick spend is not intentional, but some is if the purchaser knows that no-one is monitoring where they are spending.   Setting and enforcing policies can reduce this issue, but an organisation needs full spend visibility to try and identify and prevent it.  

Read more on controlling maverick spending in procurement.  

*************************************************

For more insights into Procurement & Supply Chain - check out the latest edition of Procurement Magazine and be sure to follow us on LinkedIn & Twitter

Other magazines that may be of interest - Supply Chain Magazine | Sustainability Magazine

Please also check out our upcoming event - Procurement & Supply Chain LIVE in London at the BDC on Sept 26/27th 2023

*********************************************

BizClik is a global provider of B2B digital media platforms that cover 'Executive Communities' for CEOs, CFOs, CMOs, Sustainability Leaders, Procurement & Supply Chain Leaders, Technology & AI Leaders, Cyber Leaders, FinTech & InsurTech Leaders as well as covering industries such as Manufacturing, Mining, Energy, EV, Construction, Healthcare + Food & Drink.

BizClik, based in London, Dubai & New York offers services such as Content Creation, Advertising & Sponsorship Solutions, Webinars & Events.