Maverick spend costs businesses thousands each year. From tail spend and office supplies to multi-million dollar procurement contracts, the minor leaks of maverick spending quickly become a flood of lost revenue.
Procurement leaders are increasingly aware of the need for automation and visibility in combating rogue spending. In this article, we’ll look at the practical steps you can take to curb rogue spending and reduce the risk of unauthorised procurement activities.
Maverick spend definition
“Rogue spending, otherwise known as dark purchasing or maverick spending, is any purchasing or procurement behaviour that’s unexpected, unorthodox or noncompliant with your business’s procurement guidelines.”
What causes maverick spending?
Rogue spending could be costing your business thousands, without you even realising. In fact, the staff member may not realise they’re doing it themselves.
Maverick spending is often unintentional and comes from a lack of understanding, lack of training or a lack of resources on the part of the team member. If your guidelines are unclear, outdated or not properly enforced, you could leave your organisation open to the scourge of rogue spending.
Some of the most common causes of maverick spending include:
- Immature or outdated procurement processes. Ad hoc or unregulated procurement activities can easily lead to rogue spending. Outdated manual procurement and supplier management processes such as spreadsheets and handbooks leave staff with too much autonomy and not enough direction.
- A lack of visibility and communication. A business may have procurement guidelines in place, but if they’re not effectively communicated to staff, the company is left open to rogue spending, whether accidental or intentional. They may not have a clear list of preferred suppliers, or it may be out of date.
- Cumbersome approvals processes. Complicated or frustrating approval processes often lead staff to skip compliance steps. When working to a deadline, staff may be tempted to bypass time-consuming or cumbersome approvals processes in order to get the job done on time.
- Undertrained staff. When staff are aware of the dangers and impacts of rogue spending they’ll be less likely to fall victim to accidental or intentional maverick purchasing activities.
What is the impact of maverick spending on businesses?
Maverick spend behaviours can cost you more than revenue. There are a range of wide-reaching impacts of rogue spending.
- Reputational damage – By purchasing from non-preferred vendors your company may be left open to reputational damage. For instance, if a supplier doesn’t meet ESG requirements or has a dubious supply chain, your business is just as liable for damage as the supplier.
- Unnecessary expense – With rogue spending, pre-negotiated prices are often unused, and bulk discounts are missed. For instance, staff from multiple departments may order products or professional services separately and be charged based on volume, but if they had made one group purchase, they could have saved money.
- Breach of contract – Your procurement department may have negotiated minimum volume deals with suppliers. If a staff member is unaware of these negotiated contracts they may purchase from another supplier, causing a shortfall in your company’s agreement with the preferred supplier.
How to prevent maverick spending in procurement
Fortunately, there are many practical ways to control maverick spending. With the advent of spend management software, it’s easier than ever for your procurement team to gain visibility over spend data and develop and enforce an approved purchasing process and procurement policies for your organisation. Here are some of the ways maverick buying can be prevented.
1. Increase Spend Visibility
Gaining visibility over spend categories and expenses is the first step in controlling maverick spend activity. Spend visibility can not only help to control maverick spend, it can also make planning easier and help you make more strategic purchasing choices and make enterprise resource planning simpler.
When purchasing and procurement activities are kept separate with no visibility it’s easy for mistakes to happen and for rogue purchases to slip through the cracks. A lack of visibility makes it easy for staff to exceed spending limits, whether accidentally or intentionally, and with no accountability staff are more likely to conduct purchasing behaviours that aren’t in line with best practices.
How procurement software can help:
- Advanced Marketplace software empowers members of your organisation to make informed procurement decisions with autonomy and accountability.
- Spend management software provides real-time visibility into spending across your organisation allowing your procurement team to track all purchasing and ensure there are no anomalies.
- The greater visibility provided by procurement software enables businesses to identify maverick spend activity and pick up unnecessary, incorrect or fraudulent expenses.
- With dashboards, reports and a central hub for all procurement activities you can see at a glance whether your staff have been acting within your procurement team’s spending guidelines.
“We chose it because we had a need for a specialist marketplace which had a wide range of scientific and laboratory consumables already hosted and available. The Marketplace allows you to easily compare different products, which was extremely important for us”
– Queensland University of Technology
2. Implement Pre-Approvals & Strategic Sourcing
Complex or time-consuming approvals processes are a common cause of maverick spend activity. By smoothing your approvals and providing your staff with a list of pre-approved vendors you can curb rogue spending and ensure you’re engaging the best possible suppliers and service providers for your business.
Traditional pre-approval processes involve a lot of manual, time-consuming steps and are often prone to double handling and human error. Teams may end up referring to outdated supplier lists or asking for approval on a vendor who has been used before, leading to hours of wasted time and potentially harmful contracts being awarded.
The benefits of pre-approvals:
Pre-approvals provide a range of benefits, from ensuring all vendors adhere to ESG requirements to building stronger relationships with suppliers, which can not only ensure contracts are fulfilled on time, but also your team receives competitive rates and streamline your purchasing process.
How procurement software can help:
- Advanced Marketplace software streamlines the pre-approval process by providing a list of preferred suppliers for each spend category.
- It also provides a list of existing contracts which staff can refer to when making purchasing decisions.
- With the help of procurement software, unauthorised spending is virtually impossible, as all procurement decisions must be made via the pre-approved suppliers.
“The automation brought by the Marketplace has reduced two human touchpoints and allows the team to dedicate their time to more strategic tasks rather than spending hours reviewing and approving simple purchase requests.”
– Queensland University of Technology
3. Utilise Spend Forecasting
When you know how much something should cost, it’s easier to ensure you stay within those parameters. Spend forecasting can help control rogue spending by providing clear targets for staff members to adhere to.
In the past, procurement leaders would have to conduct spend forecasting manually, gathering data from previous purchases and analysing future procurement needs to develop targets. Spend management software can do the heavy lifting for you and provide the data you need to make better budgeting decisions.
How procurement software can help:
- Data analysis and reporting. Spend management software collates and presents spend data which can be used for predicting future costs. For instance, procurement leaders can look at the overall procurement costs of a particular department or project over the space of a year when deciding on the annual budget.
“Advanced Marketplace has helped us to strengthen relationships with suppliers, have enterprise-wide pricing and visibility.”
– Queensland University of Technology
Eliminate maverick spend behaviour with Advanced
Spend management software is your key to curbing rogue spending. Advanced procurement software offers user-friendly features and workflows designed to provide maximum visibility over your procurement lifecycle. It can automate and eliminate time-consuming and costly manual processes and leave more time for value-adding planning, budgeting and strategic thinking.
As an Advanced company, Portt brings the power of the Advanced Marketplace to higher education, science and research companies across Australia and New Zealand.
If you’d like to curb rogue spending in your organisation, leave your details below and we’ll get in touch.
