What is Maverick Spend?

Q: What is Maverick Spend?

Maverick Spend refers to unauthorized or off-contract purchases made outside of an organization’s approved procurement processes, which can lead to inefficiencies and increased costs.

Definition

Maverick Spend refers to expenditures made outside of an organization's established procurement processes and controls. This often includes purchases made without prior approval, off-contract purchases, or purchases made without following the organization's defined supplier selection and approval process. Maverick spend is typically seen as unauthorized spending, which can lead to inefficiencies, higher costs, and lack of visibility into the organization’s total spend. Controlling maverick spend is crucial for maintaining financial discipline and ensuring procurement activities are aligned with strategic objectives.

How It Works

To manage and control Maverick Spend, businesses must first track and measure the purchases that fall outside of approved procurement processes. This is typically done by reviewing purchase data, invoices, and supplier agreements. Key components of managing Maverick Spend include:

Purchase Order (PO) Compliance: Ensuring that all purchases are made through the formal PO process and that no purchases are made outside the approved system.
Supplier Compliance: Making sure that all suppliers and vendors are pre-approved and included in the official supplier list, and that any deviations from this list are flagged as maverick spend.
Expense Approval Workflow: A transparent and automated system to ensure that all expenses are approved before payments are made, preventing unauthorized transactions.

Core Components of Maverick Spend

The core components that contribute to Maverick Spend are:

Non-Discretionary Spend: Some purchases, like utilities or other essential services, might fall outside normal procurement processes but still need to be tracked to avoid surprises in the budget.
Discretionary Spend: This includes purchases that could be managed through a formal procurement process but are instead made impulsively, without proper approval or oversight.
Procurement Spend Governance: Establishing clear rules and processes around which purchases can be made outside of formal systems and under what conditions, improving control over overall expenditures.

Practical Use Cases in Business

Maverick Spend can significantly impact an organization's financial health and operational efficiency. Some practical use cases for controlling and managing Maverick Spend include:

Implementing procurement spend governance to ensure that all purchases are processed through the official procurement system, reducing the risk of uncontrolled spending.
Using spend visibility (expenses) tools to monitor and analyze purchases made outside the approved system, identifying trends and areas of improvement.
Applying vendor spend visibility to ensure that all vendors are pre-approved, and purchases are only made from suppliers that are part of the company’s negotiated contracts.

Advantages and Best Practices

Managing and reducing Maverick Spend offers several advantages to organizations:

Cost Control: By reducing maverick spend, companies can negotiate better pricing and terms with suppliers, improving overall cost-efficiency.
Increased Compliance: Enforcing strict procurement processes helps ensure that all spending is aligned with company policies and regulatory requirements.
Enhanced Supplier Management: Reducing unauthorized purchases ensures that companies maintain good relationships with approved suppliers, consolidating purchases and maximizing vendor discounts.

Best practices for controlling Maverick Spend include:

Implementing real-time spend monitoring tools that can immediately identify any unapproved purchases, allowing for quick intervention and correction.
Regularly training procurement teams and employees on the importance of following the approved procurement processes and the potential risks associated with Maverick Spend.
Establishing clear guidelines and approval processes for when maverick spend is acceptable, and ensuring that all employees are aware of these exceptions.

Summary

Maverick Spend represents a significant challenge for organizations trying to maintain control over their finances and procurement processes. By tracking and managing unauthorized spending, businesses can improve cost efficiency, reduce risk, and ensure compliance with internal policies. Through best practices such as improving spend visibility, enforcing procurement spend governance, and leveraging technology for real-time monitoring, companies can reduce maverick spend and optimize their overall purchasing strategies.