Organizations are turning to spend management solutions to keep the organizational spend in check. They’re aware of the mayhem maverick spend can cause on the company processes as well as the bottom line. In a way, maverick spend is good as it coerces the management to spot the gaps and take corrective measures. However, it can have a negative impact on the organization’s bottom line. Apart from the financial impact it also directly disrupts the procurement operations.
What and Why of Maverick Spend
In simple terms, maverick spend means purchasing from suppliers outside the organizations procurement policy i.e. purchasing goods or services from anyone other than the organizations preferred suppliers. This has two implications: one, the organization loses the benefits of supplier discounts and second, it sabotages the supplier relationships and negatively impacts the future contract possibilities. Maverick spend is also known as unmanaged spend, which often results in procuring at a higher cost. It is very tough to identify these spends and control it, but eventually it affects the bottom line.
Employees often go off contract and procure goods or services because there is no enforcement or penalty in place to keep them on track. Maverick spend is a result of poor communication and low spend visibility that eventually leads the employees to procure from non-preferred suppliers. One of the reasons for maverick spend can be attributed to complex decision making and approval processes, where employees seek the quicker way out find a solution.
How Do You Combat the Enemy in Disguise?
We have already established the fact that maverick spend occurs for a set of reasons such as complex approval processes and lack of communication. Let us have a look at how we can curtail these spends in the organization.
- Identifying the maverick spend is essential. This means the organization must ensure spend visibility so as to identify the unmanaged costs. This requires a detailed spend analysis to spot gaps in the spend information.
- Enumerate the reasons for the maverick spend in the organization which could be anything from complex approval processes, indecisive management and lack of communication. The management should focus on rectifying these gaps in the organization.
- Evaluate the procurement process and identify the loopholes present in it and make effort to simplify the process and making it user friendly.
- Accountability helps pin-pointing a mistake to a particular source or person, thereby making it easier for the procurement professionals to identify the root cause of an issue, ascertain the spend and its source.
Organizations must realize that maverick spend is harmful for the businesses bottom line and hampers its profitability. They should take the requisite steps in time so as to identify the gaps, bridge them and mitigate potential risks. At SpendEdge, we offer organizations granular actionable insights that help them to identify spend trends and understand their buying activities, thereby driving cost saving opportunities and profitability for the organization.
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