Maverick spend is a common challenge in procurement, often leading to increased costs and reduced efficiency. It refers to purchases made outside of an organization’s established procurement processes, bypassing approved channels and suppliers. This can result in missed opportunities for volume discounts, weaker supplier relationships, and even compliance risks. In today’s cost-conscious business environment, managing maverick spend is critical to ensuring operational efficiency and cost savings. Let’s explore five ways to take control of maverick spend and ensure that your procurement processes run smoothly and cost-effectively.

Key Takeaways:

• Maverick spend undermines procurement processes and leads to increased costs and inefficiencies.
• Controlling maverick spend requires improving spend visibility, implementing proper training, and leveraging technology.
• A collaborative approach with shared accountability can significantly reduce maverick spend and strengthen supplier relationships.

What is Maverick Spend in Procurement?

The term “maverick” comes from Samuel Augustus Maverick, a Texas mayor who, in the 1800s, famously did not brand his cattle. His unconventional approach led to the term being used for anything that deviates from the norm—hence the name maverick spend for unauthorized or unmanaged procurement activities. In simple words, maverick spend is the purchase of goods/services from suppliers beyond a company’s pre-established procurement policy. In such situation a company does not benefit from supplier credibility and discount besides its vendor relationship being affected through unethical business practices.

Five Ways to take Control of Maverick Spend

1. Improve Spend Visibility

Visibility into your organization’s spending is crucial for taking control of maverick spend. Without a clear understanding of where and how money is being spent, it’s easy for unauthorized purchases to slip through. Conducting regular spend analysis audits can help identify gaps and spending anomalies, allowing procurement teams to establish actionable steps to address maverick spend.

Read more: Maverick Buying: Ways to Identify & Stop Maverick Buying

Spend visibility allows procurement professionals to monitor and enforce compliance with procurement policies. It also enables better decision-making, as you can identify trends, negotiate better deals with suppliers, and ensure that all purchases align with the company’s goals.

According to a McKinsey report, companies that prioritize comprehensive spend visibility have seen significant improvements in savings and compliance. This highlights the importance of transparency and accountability in the procurement process.

Benefits Realized:

• Clear identification of non-compliant purchases.
• Better decision-making and cost control.

2. Provide Training to Employees

Many instances of maverick spend are the result of employees being unaware of procurement policies or the consequences of not following them. To mitigate this, procurement teams should implement regular training programs for all employees involved in purchasing decisions.

Download the Whitepaper: Smart Spend Analysis: A bird’s eye view

Training should cover the importance of adhering to procurement processes, the financial impact https://aws.zycus.com/solution/vendor-invoice-management-systemof maverick spend, and how following approved procurement channels benefits both the company and its suppliers. By educating employees, you foster a culture of compliance and reduce the likelihood of maverick spend occurring due to ignorance or misunderstanding.

Moreover, training can help employees understand the cost of manual processes such as invoice management, payment processing, and reimbursement procedures. This can further encourage the use of approved procurement systems and reduce maverick spend.

Benefits Realized:

• Reduced instances of unauthorized purchases.
• Increased awareness of procurement processes across the organization.

3. Leverage Technology and eProcurement Solutions

Procurement automation plays a vital role in controlling maverick spend. By implementing an intuitive, user-friendly eProcurement system, organizations can streamline the purchasing process and make it easier for employees to comply with procurement policies. Outdated or overly complex procurement systems can frustrate employees and lead to more maverick spend as they bypass the system in favor of faster, albeit non-compliant, purchasing methods.

Investing in modern procurement automation software ensures that all purchasing activities are routed through the appropriate channels, improving compliance and spend control. Additionally, procurement software can provide real-time visibility into spending, making it easier to monitor and manage purchases. As per Gartner, half of procurement contract management will be AI-enabled by 2027, indicating the growing role of technology in optimizing procurement processes .

Benefits Realized:

• Automated compliance with procurement policies.
• Enhanced spend tracking and control through real-time visibility.

4. Promote Shared Accountability

Procurement shouldn’t be the sole responsibility of the procurement department. A successful strategy for controlling maverick spend involves shared accountability across departments. Each department should be aware of its budget and responsible for ensuring that its purchases are made through approved procurement channels.

Departments should also be educated about the benefits of leveraging preferred suppliers and the potential savings from using pre-negotiated contracts. By fostering a culture of responsibility and collaboration, you can significantly reduce maverick spend.

To enhance accountability, consider implementing approval workflows that require sign-off from department heads for any significant purchases. This will ensure that purchasing decisions are aligned with company goals and prevent unnecessary or unauthorized purchases.

Benefits Realized:

• Reduced out-of-network spending.
• Strengthened internal controls and compliance with procurement policies.

5. Implement Additional Measures

Aside from the strategies mentioned above, there are other practical measures that can help reduce maverick spend. These include:

• Reducing reliance on P-cards: P-cards (procurement cards) are convenient but can be difficult to track and control. Limiting their use can help centralize purchasing activities through approved channels.
• Standardizing supplier onboarding: Ensure that new suppliers are added to the system only when necessary, and after they have been properly vetted. This prevents unnecessary vendor additions, which can contribute to maverick spend.
• Requiring C-suite approval for significant purchases: For high-value, non-contract purchases, having C-suite approval can act as an additional layer of control, preventing unnecessary spending.

By implementing these measures, organizations can further minimize the risk of maverick spend and enhance financial performance.

Benefits Realized:

• Greater control over high-value purchases.
• Prevention of unnecessary supplier additions.

Conclusion

Maverick spend can seriously impact an organization’s bottom line by leading to higher costs, inefficiencies, and compliance risks. However, by improving spend visibility, leveraging modern technology, promoting shared accountability, and providing proper training, organizations can effectively manage and reduce maverick spend. Implementing these strategies ensures that purchasing activities align with the company’s procurement policies, strengthening supplier relationships and driving financial performance.

Ready to take control of maverick spend in your organization? Book a demo today to explore how Zycus’ procurement solutions can help streamline your procurement process and drive compliance

FAQs

Q: What is Maverick Spend?

Maverick spend refers to purchases made outside of established procurement processes, often leading to higher costs and inefficiencies.

Q: How can better data analytics help control Maverick Spend?

Implementing robust data analytics can help identify patterns and trends, enabling better tracking and management of unauthorized purchases.

Q: Why is supplier collaboration important in managing Maverick Spend?

Collaborating with suppliers can streamline procurement processes and ensure that purchases align with contractual agreements, reducing instances of off-contract spending.

Q: What role does employee training play in reducing Maverick Spend?

Educating employees about procurement policies and the importance of compliance can significantly decrease unauthorized spending.

Q: How can investing in procurement software help manage Maverick Spend?

Procurement software can automate purchasing processes, enforce compliance, and provide real-time visibility, making it easier to control and reduce maverick spend.

Related Reads:

1. A Complete Guide to Vendor Management – its Benefits, Challenges, Process & Best Practices
2. 7 Steps to Effective Spend Management
3. How Can Procurement Spend Management Help Your Organization’s Bottom Line?
4. Top 7 Spend Management Software Benefits to Revolutionize your Financial Management
5. The Role of Spend Analysis Solutions in Modern Procurement
6. Zycus iAnalyze – Spend Analysis Software
7. Benefits and Challenges You Didn’t Know about Spend Management
8. White Paper: Spend Data Classification: Making sense of Data
9. White Paper: Advanced Spend Analytics: A new offering for your procurement initiatives
10. White paper: Smart Spend Analysis: A bird’s eye view