Maverick Spend

Maverick spend, also known as rogue spend, refers to purchases made outside an organization’s established procurement rules and procedures. This type of spending occurs when employees either deliberately ignore procurement processes or make purchasing mistakes that do not align with previously negotiated terms.

Impact of Maverick Spend. The consequences of maverick spend can be significant:

• Financial Losses: Organizations may lose up to 16% of negotiated savings due to maverick spending.
• Reduced Quality Control: Purchases from unapproved vendors may result in subpar quality goods or services.
• Supplier Relationship Issues: Maverick spend can lead to potential breaches of contract and loss of trust with established vendors.
• Compliance Risks: Working with unknown suppliers may result in regulatory non-compliance.
• Inefficient Operations: Back-office functions waste time reconciling unauthorized purchases and adjusting budgets.

Research by the Chartered Institute of Procurement & Supply (CIPS) reveals that maverick buying can account for up to 80% of all invoices, even in large organizations with dedicated procurement departments1.

To effectively manage and reduce maverick spend, organizations should consider the following strategies:

1. Conduct a Spend Analysis: Perform a thorough spend analysis to identify where maverick spending exists:

• Consolidate all spend data from various sources
• Clean and standardize the data
• Categorize spending by amount, department, vendor, and category
• Analyze results to calculate maverick spend percentages

2. Improve the Procure-to-Pay (P2P) Cycle: Enhance the P2P process to maximize sourcing efficiency and manage payments effectively:

• Implement a system that provides better control
• Offer an intuitive interface for business teams to make purchases
• Simplify workflow procedures and approval processes

3. Implement Robust Spend Management Systems. Utilize expense management software to centralize spend data and create automated workflows. This approach allows for easier spend analysis and identification of problem areas.

4. Establish Clear Spending Policies: Document and distribute clear procurement policies to all employees. Use online document-sharing platforms to ensure the most up-to-date version is always accessible.

5. Educate and Train Employees. Address the “non-compliant mentality” reported by 69% of organizations as a top cause of maverick spend:

• Provide regular training on procurement policies and procedures
• Explain the negative consequences of maverick spending
• Offer guidance on the proper use of procurement systems

6. Centralize Procurement. Consider establishing a dedicated procurement team or individual to oversee all purchasing activities. This centralization makes it easier to identify and address maverick spend as it occurs.

7. Leverage Technology. Implement procurement automation tools that offer features such as:

• Automated approvals workflow
• Invoice matching automation
• Spend visibility and reporting functionality

By adopting these strategies, organizations can significantly reduce maverick spend, improve financial control, and optimize their procurement processes. Regular monitoring and adjustment of these measures will ensure continued effectiveness in managing rogue spending.

At Levelpath, we don’t just provide a software solution; we provide a customer commitment in the form of a partnership. Our success team is dedicated to empowering procurement with the knowledge, tools and support they need to stay curious and continually drive procurement transformation. From initial workspace setup to advanced customization and beyond, the Levelpath community is there every step of the way.

To learn more about how Levelpath can help your organization move faster, uncover risks earlier, and keep people focused on the more strategic work, request a demo today.