Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Maverick Spend — Too Fast For Spending, Too Slow For Results
Key takeaways
- Maverick spend is also known as the ghost expense that occurs without official notice in the procurement process.
- This spending accounts for a majority of a company’s detrimental spending. Thus, negatively affecting its financial position.
- Addressing this spending concern helps a company maintain financial health and stability.
Complex and detailed is usually what comes into mind, when describing procurement. A company carefully tailors their procurement processes with an effective procurement strategy.
The company and more specifically, the procurement team does this by effectively utilizing data-driven decision-making, from quality procurement data. But what if there is a sudden discount from the usual supplies sourced by the procurement team?
In this article, we will be discussing maverick spend, how it occurs, how it affects the procurement process, and if it would be a ‘sound’ procurement step to take.
Keep the trigger finger down just yet, and take some time to read the space, and take a read to make a sound procurement strategy.
I created a free, downloadable spend analysis template. This includes an editable Excel template and a PowerPoint presentation to help you identify buying patterns and optimize your spend. I even created a video where I’ll explain how you can use this template.
What Is Maverick Spend?
Basically, maverick spend is the expense that occurs without official notice in the procurement process. It is also known as “Ghost Spend” as maverick spend goes under the nose of the company and the procurement team.
Since Maverick Spend occurs without notice, it is like a silent illness that attacks the company and denies the implemented procurement strategy. Spending is a crucial process in Procurement which is why Maverick Spend is something that the procurement team of the company should address.
Moreover, Maverick spend implies that the procurement policy being adapted by the company is not optimal for its overall procurement process. Spending out of the procurement policy’s authority disrupts the general process of a company’s procurement, thus creating more harm than good for the long run.
Understanding Maverick Spend is crucial, most especially when it concerns a company’s procurement process. The spending costs of the company is one of the important procurement data, as it concerns the company shelling out unnecessary costs that disrupts the procurement flow.
Maverick spending, in general, is a process that the procurement team needs addressing of, whether the happenstance of maverick spend was vital for the procurement of goods and services, or if it was purely accidental.
This is to ensure a smooth flow of the company’s procurement process, make optimal use of procurement data, and most importantly, not waste the spending budget aligned with the company’s procurement policy.
After defining Maverick spending, you must also know that there are
Types Of Maverick Spending
You can pinpoint the types of maverick spending through the levels of control you have on them. As previously discussed, it seems impossible to control how maverick spending occurs, but through acknowledging the various levels of spending done one can understand and segregate it into types:
1. Uncontrolled
The uncontrolled type of maverick spending occurs when there is no identifying mark of the vendor or supplier with an associated contract. This shows a lapse in proper procurement data management, as it is out of the known procurement policy of the company.
2. Partly Controlled
It occurs when doing a purchase with a supplier, within the authority of the company’s procurement policy, but is without notice of the purchase done. This shows a weakness in enforcing the company’s procurement policy, as maverick spending is still susceptible to happen.
3. Insufficiently Controlled
Third is Insufficiently Controlled Maverick Spending. It occurs with an approved vendor, with the notice of the company’s procurement, but lacks detailed information. This shows a lapse in the procurement policy’s quality assurance, as vital procurement data lead to insufficiency of information in making the purchase.
Having known of the types and implications as to why maverick spending in a company occurs, it is important to always ask,
Why Does Maverick Spend Occur?
Being worried about Maverick spending in the company is a problem the procurement team should consider and focus about. We should first understand why it happens in a company’s procurement process, or rather outside of their procurement policy.
Maverick spending happens due to the following reasons:
Procurement process is flimsy, meaning the procurement team has not optimized their procurement strategy to cover procurement purchases leading to maverick spend.
- Mishandled Procurement Data – without proper segregation of procurement data, companies tend to overspend and forego procurement policy, which makes the company’s procurement process vulnerable.
- Improper supplier procurement relationship – establishing supplier relationship is important when it comes to company spending. Maverick spending has more tendency to occur when the procurement team cannot secure proper procurement of goods and services and establish it with suppliers.
- Skills mismanagement – related with managing procurement data, the procurement team must have sufficient background and optimization of the procurement team. Maverick spending has more tendency to occur when individuals with inefficient skills are handling vital procurement data like purchasing invoices, and spending procurement data.
- Alternative spending tactics – even with a properly implemented procurement strategy, some individuals from the procurement team may unexpectedly pre-empt the spending situation of the procurement process, due to finding cheaper alternatives, all the while a spending contract is already in place.
Unexpectedness, misalignment, and even a “call to action” are factors that can affect a company’s maverick spending. An efficient procurement team can mitigate and optimize their procurement strategy to further avoid maverick spend.
It may be easy to say in general that resolving a company’s maverick spend is for a procurement team to stabilize their procurement process and strengthen their procurement data and its dissemination with the team, but if it itches you
Why Do We Control Maverick Spending?
Mainly, it denies company procurement policy. Maverick Spending is still a spending out of the prescribed purchasing strategy of the company. If positives cannot convince you, here are some of the reasons for controlling maverick spending:
1. Supply Quality
Maverick spending does not assure the quality of the purchased goods, unlike the assurance of a robust procurement process. Jeopardizing quality is most likely to happen when sudden trigger pulls purchases happen.
2. Supply Cost cutting
Since maverick spending is outside of a company’s procurement process, costs are properly delineated and instead of having quality supply at an agreed price, costs go beyond the projected price with supplies having quality that is not up to par.
3. Supplier Relationship Building
Third is important, Supplier Relationship building. Aside from having low-quality spends, this loosens trust with quality suppliers, and overall, negatively affects the company’s procurement.
4. Supply Budgeting
Lastly, Supply budgeting. With the problems, it is safe to say that this can affect the general procurement policy, most especially the budget for supplies. Since maverick spending is outside procurement policy. Not only that it harms the budget but also the integrity and value of the company.
So, controlling maverick spending is important, given that it affects quality, trust, and even the general procurement process. That being said, it is important to know
What Are The Ways To Avoid Maverick Spending?
Easily, an effective procurement team, and a robust procurement strategy could resolve the maverick spend of a company. But there are also ways in which a procurement team could investigate if Maverick spending persists, even amidst a tailored procurement process. Procurement Tactics suggests 5 ‘E’s of avoiding maverick spending:
1. Enforcing the procurement policy
Of course, it is a no-brainer if the procurement policy that your team has carefully formulated will be all for nothing. By making sure that the company, most especially the procurement team adheres to the procurement strategy, the company will be able to avoid unnecessary purchases.
Moreover, enforcing the procurement policy shows consistency and clear communication of the procurement team regarding purchases, effectively avoiding maverick spend.
This does not only entail an efficient procurement team, but also an optimal procurement policy that enhances value and visibility for the company. A plus value, if you would ask.
2. Extend Procurement data management
Maximizing a company’s handling of procurement data is also important to avoid maverick spending. By being able to disseminate information to the involved individuals, it is easier to avoid maverick spending.
Obviously, procurement data is not simply there to be a sort of display, but is a strong reference for the company. Everyone involved with the procurement process is entitled to utilize the company’s procurement data to assure the smooth flow of the company’s procurement.
3. Employ spending management
Consequently, the third E is to employ spending management. Procurement data management is one thing to ensure that procurement data remains effective. A more specific employment of spending management can focus on maverick spending.
By allotting a specific skill set that could monitor, gather, and assess the company procurement spending, reducing unnecessary purchases could not be easier than ever.
4. Effective Spend analysis
This leads us to the fourth E which is Effective spend analysis. The crucial analysis to be taken by employing a spending management. The team must recognize where most of the maverick spending occurs in order to properly assess the current scenario of the company’s spending.
By utilizing the quality procurement data, the procurement team, addressing the risks, and problems posed by maverick spending will be a walk in the park.
5. Establish robust supplier relations
This then walks us to the fifth and final E which is Establishing robust supplier relations. Keeping in touch with preferable suppliers is crucial in the procurement process. It helps smoothen out the other complex steps to be taken by making the procurement data on suppliers more available for employees in affecting their purchase decisions.
Having a robust relationship with the suppliers entail their own rewards and exclusivities, if the company continues to enforce and communicate their procurement policy. This can reduce maverick spending by further streamlining the purchasing necessities of the company.
Conclusion
Maverick spending is ghost spending. It is a purchase that is out of the company’s procurement policy. It may be accidental or out of good faith. Regardless, it implies that the procurement strategy of the company has loopholes and needs re-establishment. An effective procurement team can undertake necessary steps to avoid the unnecessary maverick spending.
In this article, maverick spending can be effectively avoided by following the 5 ‘e’s of Procurement Tactics’ handling the company’s maverick spending. These are:
- Enforcing the procurement policy
- Extend procurement data management
- Employ spending management
- Effective spend analysis
- Establish robust supplier relations
By having to follow suit, this can further enhance a company’s decision making in their spending and eventually optimize their overall procurement.
Frequentlyasked questions
What is Maverick Spending?
Maverick Spending is a company expense that is not recorded by the procurement team.
Why is addressing Maverick Spending Important?
It shows that the company’s procurement policy is ineffective, and not optimized. It can also reduce the spending risks of the company.
How can we avoid Maverick Spending?
Procurement Tactics suggest following the 5 ‘e’s to avoid maverick spending:Enforcing the procurement policy, Extend the procurement data management, Employ spending management, an Effective spending analysis, and Establish robust supplier relations.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
