Understanding and controlling maverick spend

In the world of procurement, there exists a phenomenon that can wreak havoc on budgets, undermine strategic sourcing efforts, and leave finance teams tearing their hair out: maverick spend. It's a term that strikes fear into the hearts of procurement professionals, and for good reason. But what exactly is it? Why is it so problematic? And, most importantly, how can organisations manage maverick spending?

This blog post will uncover the intricacies of maverick spend, exploring its meaning, providing a clear maverick spend definition, explaining what is maverick spend, and ultimately, offering strategies to bring it under control, especially within the context of what is maverick spend in procurement.

What is maverick spend?

Maverick spend, also known as rogue spending, maverick buying, or off-contract spend, refers to any purchasing activity that occurs outside of established procurement processes and negotiated contracts. It's the purchasing equivalent of going rogue, hence the "maverick" moniker. Instead of utilising pre-approved suppliers and contracts (established by the procurement department), employees make purchases independently, often driven by immediate needs, perceived lack of alternatives, or simply a lack of awareness regarding existing procurement policies and procurement processes. This can involve anything from office supplies bought with company credit cards to more significant expenditures on professional services without proper approvals. Understanding the maverick spend meaning is the first step to controlling it.

What are the causes of maverick spend?

Several factors contribute to the prevalence of maverick spending. Some common causes include:

• Lack of awareness: Employees may be unaware of existing contracts, supplier lists, or preferred suppliers. They may not understand the procurement process or the importance of adhering to procurement rules.
• Urgency/emergency: A perceived urgent need can lead employees to bypass established procedures, opting for a quick fix rather than following the procurement process.
• Lack of trust in procurement: Employees might believe the procurement department is too slow or inefficient, leading them to seek faster, albeit unauthorised, alternatives.
• Decentralised procurement: In organisations with decentralised procurement activities, it can be challenging to maintain control and ensure compliance.
• Ease of purchase: Corporate debit cards and credit cards can make it too easy for employees to make uncontrolled purchases without proper purchase approval.
• Lack of enforcement: If there are no clear consequences for rogue spend, employees are more likely to engage in it.
• Poor communication: A lack of communication between the procurement teams and other departments can lead to misunderstandings and unauthorised spending.
• Inadequate training: Employees may not receive sufficient training on procurement policies, purchasing processes, and purchasing workflows.
• Spot buying: The need for a one-off purchase can sometimes lead to maverick behaviour, especially if the process for such purchases is unclear.

Why is it important to control maverick spend?

The consequences of maverick spend can be significant, impacting an organisation's financial stability and operational efficiency. Here's why controlling it is crucial:

• Loss of savings: Maverick spend undermines negotiated discounts and favourable purchasing terms with preferred vendors. This leads to loss of savings and potential overspending.
• Reduced spend visibility: Uncontrolled spending makes it difficult to track and analyse spending in procurement, hindering spend analysis and informed decision-making.
• Weakened supplier relationships: Bypassing preferred suppliers can damage supplier relationships and limit opportunities for better pricing and service.
• Increased costs: Maverick purchases often come at a premium, as they aren't subject to negotiated price levels.
• Compliance risks: Unauthorised spending can lead to potential breaches of internal procurement guidelines and external regulatory requirements.
• Inefficiency: Maverick spend creates extra work for the accounts payable and procurement professionals who have to reconcile unapproved purchases.
• Financial risks: Uncontrolled spending and unapproved vendor relationships increase financial risks and make it harder to manage the procurement budget.
• Operational risks: Inconsistent supply chains due to non-preferred suppliers can lead to operational disruptions.

5 tips to keep maverick spend under control

Controlling maverick spend requires a multi-faceted approach. Here are some effective strategies:

1. Develop clear procurement policies

Establish comprehensive procurement policies and purchasing processes that are easy to understand and follow. Communicate these policies clearly to all employees about procurement policies.

2. Invest in procurement technology

Implement e-procurement software or a spend management platform to automate the P2P process, enforce purchase limits, and provide spend visibility. Consider self-service or guided buying tools to make compliant purchasing easier.

3. Train employees

Conduct regular training sessions on procurement protocols, purchasing procedures, and the importance of compliance with procurement policies.

4. Strengthen supplier relationships

Develop strategic supplier relationships with preferred suppliers to ensure competitive pricing and reliable service. Make sure employees understand the benefits of using pre-approved vendors.

5. Enforce compliance

Establish clear consequences for maverick spending and consistently enforce procurement rules. This fosters a culture of compliance and accountability.

Benefits of managing maverick spend

Effectively managing maverick spend brings numerous benefits, including:

• Cost optimisation: Consolidating spend with preferred suppliers and adhering to negotiated contracts leads to substantial cost savings.
• Improved spend visibility: Tracking and analysing purchasing activity provides valuable insights into spending in procurement, enabling better budget management and strategic decision making.
• Stronger supplier relationships: Focusing spend with preferred vendors strengthens supplier contracts and fosters strategic relationships.
• Increased efficiency: Streamlined purchasing processes and workflow automation software improve procurement efficiency and free up time for strategic initiatives.
• Reduced risk: Compliance with procurement guidelines minimises financial risks and operational risks.
• Enhanced financial health: Controlling unnecessary expenses contributes to the overall financial health of the organisation.

Other types of spend to keep an eye out for

While maverick spending is a critical area to address, it’s also worth understanding related concepts. Two terms you’ll frequently encounter are tail spend and spot buying.

Tail spend

This refers to the numerous small, often low-value purchases made across a wide range of suppliers. While individually insignificant, cost tail spend purchases can collectively represent a substantial portion of overall spend and are often associated with maverick spend. Managing tail spend effectively is crucial for achieving comprehensive spend control.

Spot buying

This refers to one-off purchase of goods or services, often to meet an immediate or unexpected need. While sometimes necessary, spot buying can easily lead to maverick spending if not managed properly. Clear procurement protocols and purchase approval processes are essential for controlling spot buying.

Why Weel is your solution for maverick spend management

Weel offers a comprehensive spend management software designed to give businesses granular control over all aspects of their spending, with a particular focus on taming maverick spend. We understand the complexities of managing diverse spending streams, and our platform is purpose-built to provide the visibility, control, and automation you need to bring maverick spending in line. Weel empowers organisations to enforce procurement policies, streamline approval processes, and achieve complete spend visibility, naturally leading to reduced maverick spending, optimised costs, and improved operational efficiency. Here's a deeper dive into how Weel tackles the maverick spend challenge:

• Centralised Spend Control: Weel provides a single, unified platform for managing all business spending, from purchase requests and approvals to expense reports and vendor payments. This centralised approach eliminates fragmented systems and provides a holistic view of where your money is going, making it much easier to identify and address maverick spend.
• Centralised spend control: One platform for all spending, providing a holistic view and easier identification of maverick spend.
• Policy enforcement: Configure and enforce procurement policies within Weel, preventing maverick spending before it happens. Customisable workflows and approvals ensure adherence to procurement protocols.
• Automated approvals: Streamlines purchase approvals with automated routing, notifications, and reminders, reducing delays and the temptation for maverick spending.
• Real-time visibility: Gain insights into spending with real-time reporting and analytics. Identify unauthorised spending, track spend under management, and pinpoint maverick spending areas.
• System integration: Seamlessly integrates with accounting and ERP systems for a single source of truth and easier reconciliation.
• Controlled corporate cards: Physical and virtual corporate cards with spending limits and restrictions offer greater control over employee spending.

If you're looking for a solution to help you tame your maverick spend and bring order to your procurement process, we encourage you to explore how Weel can help. Take our product tour or book a demo today.

Frequently Asked Questions (FAQs)

What is maverick spend in procurement?

Maverick spend in procurement refers to any purchasing activity that occurs outside of established procurement processes and negotiated contracts. It's essentially buying "off-contract" or from non-approved suppliers.

How can businesses reduce maverick spend?

Businesses can reduce maverick spend by implementing clear procurement policies, investing in procurement technology, training employees, strengthening supplier relationships, and enforcing compliance.

What is a maverick spend rate?

A maverick spend rate is the percentage of total spend that falls outside of established procurement processes. It's a key metric for measuring the effectiveness of spend management efforts.

How to identify maverick spend?

Maverick spend can be identified through spend analysis, reviewing credit card statements, expense reports, and purchase orders. Implementing a spend management platform can automate this process and provide