The role of a procurement department is now diversified to the point that it can mean very different things from one organization or industry to the next. But one challenge that seems to be universal is managing maverick spending within every organization.
Maverick spend refers to purchasing transactions that take place outside of the centralized procurement function. This kind of spending is carried out by individual managers on a department level without the involvement of the procurement team.
Even in businesses with strong, well-established policies in place, rogue spending can erode cost-savings and profits. Even worse – in an age where corporate social responsibility and compliance are responsibilities loaded onto the plate of the procurement team, rogue spending can put businesses at risk.
The role of the procurement team is to investigate and vet suppliers based on a diverse spectrum of criteria to ensure the organization benefits from maximized purchasing power, discounts, value and that there is compliance to various internal and external ethical and legal stipulations. Without the relevant knowledge, unqualified purchasing of goods or services can undermine the efforts of the procurement department to control all elements of risk and spend management.
Shine a light on maverick spend through spend analysis software
Identifying maverick spend is the first hurdle in overcoming the issue. Achieving complete visibility of organizations spend is the only way to establish where spending is taking place outside of the central procurement function. Thorough spend analysis is the only way to achieve this insight.
A meticulous spend analytics procedure will flush out purchasing from departments or individuals who lack spending authorisation, and in our experience, it can be surprising to learn that managers have approved spending even outside of their own department just because they think their seniority allows it.
Spend analytics software can assist your procurement team in collating, categorizing and interpreting data so that you can gain visibility. After all, you don’t know what you don’t know – you need a plan to investigate.
The next step is to think about why rogue spending is happening in the first place.
Most members of an organization are fully invested in achieving profitability for their company, and won’t be engaging in maverick spend to deliberately usurp the efforts of the procurement department. Usually, a lack of cooperation is down to a lack of education or perceived or actual barriers to efficiency within the procurement process.
A solution to this problem is to roadmap the experience of departments as users of the procurement department. Understanding the purchasing journey from the perspective of others can help you to identify stumbling blocks and ensure your processes are user-friendly and maximise stakeholder engagement.
Clearly define roles, expectations and build relationships
We have said before, no other department would accept being sidelined like the procurement department. It just doesn’t happen. There is a clear delineation of who handles what aspects of the business between all other departments. It is imperative that the procurement department establishes the same boundaries.
Establishing a preferred suppliers list with very strict spend limits can help provide departments with the autonomy they crave can be very helpful, as can putting in place a robust purchase order or tendering system.
If you give the personnel within your organization a clear, simple-to-use system for purchasing, they will use them.
Make cost-savings everyone’s role
In apparent complete disagreement with our previous point, we suggest that the procurement department shares responsibility for spending across the entire business. By this, we mean instilling an organization-wide sense of responsibility for corporate spend.
A culture of individual accountability for the greater good is the key to establishing protection against big issues with maverick spending.
Every level of management should be aware of their departmental spending and how it translates to expectations and budgets – and their individual performance in the corporate spend analysis should be built into their key performance indicators. For this, you need the C-Suite on board.
Digitalize your procurement processes with a procure-to-pay software solution
We have already explained how a spend analytics solution can help you shine a light on maverick spend, and how a PO system can help you manage it. There are a wealth of digital procurement solutions that can help you organization address issues within your spending culture.
The answer to controlling maverick spending is by a) providing the path of least resistance to managers making purchasing decisions within your business, and b) having the ability to collate and interpret data to spot uncontrolled spend and nip it in the bud wherever possible.
ProcurePort’s procure-to-pay solution provides an end-to-end procurement solution that provides your personnel with a secure, cloud-based, user-friendly platform to easily manage the requisition of goods and services. Our spend analytics solution can help you to achieve true visibility across the entire business. To see whether your business qualifies for a free spend analytics assessment, contact our team of procurement experts.
