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First, let’s establish a general understanding of maverick spend and then look at ways to limit or stop it entirely. Have you ever been called a maverick? A maverick is generally someone who does not go along with the group and is viewed in a negative light. According to merriam-webster.com the term originated around 1867 when Samuel A. Maverick refused to brand his calves like the other American pioneers. Maverick spend is where people take a different path other than the accepted one, spending money in unaccepted ways. Maybe a relationship exists with a supplier where terms and pricing has been negotiated, but someone takes it upon themselves to go outside of that vendor and order elsewhere costing the company extra money.
There are two major factors that are responsible for growing problem of maverick spend and they are: continuously increasing outsourcing of services and goods for business use and secondly, increased market competition. Companies try to boost their bottom line by controlling or reducing spend. However, maverick spend that goes outside the procedures they have in place can have a significant impact on profitability.
However, as a responsible business person, you can create a proper and effective procurement strategy for your business; one that includes cutting out maverick spend. So what are some useful tips regarding how to reduce the maverick spend?
The first step that you need to follow in order to reduce your maverick spend is that you should set procurement goals and objectives for your business. Enforcing them will be your most difficult challenge, but it can be done with appropriate safety measures such as:
- Create awareness – sometimes people spend outside the accepted channels because they don’t view it as wrong or bad. They are purchasing something necessary for the business. It isn’t like they are trying to siphon off money or doing anything illegal. Make sure everyone knows what constitutes maverick spend and that it is no longer an acceptable practice.
- Create consequences – saying it is not acceptable is not enough by itself in a lot of cases. People will still justify to themselves that they aren’t doing anything wrong, or so and so from the other department ordered this item so they can doo. Give it some teeth. Set up penalties for anyone making the purchases outlined as unacceptable.
- Create monitoring – you have rules and penalties so you need to be able to catch it when it happens. Make sure you have checks and balances in place to be able to effectively monitor spend and enforce the guidelines set up by your company.
Make sure that you observe and determine all the necessary scenarios that you will have to face in order to purchase goods from your suppliers. As you begin to implement these new strategies and preventative measures be flexible. Even good plans are susceptible to change so don’t feel like once you have a plan in place that it is set in stone. If the plan is not working then be ready to make changes as you go until it is running smoothly and doing what it is intended to do: stop maverick spend.
Minimizing maverick spend will automatically increase the operational efficiency of your business and help you to save money over time.
