Maverick Spending – how could you tackle the issue and minimise it?
It is Monday morning again. You receive a call from the accounting department that some goods were delivered and there are no matching invoices. You suspect where the issue is and investigate in detail. Equipment for a new person in Marketing and furniture for the office of the new Operations director were bought without authorisation, from suppliers you’ve never heard of, with payment terms never discussed with you. It is a story that repeats almost every week, but now you are committed to deal with it once for all.
The level of maverick spending differs greatly between organisations, but a recent study by CIPS has found that it could be as high as 80%. The bottom line of this is that at best no saving is achieved for the company however, it could actually result in a for the company.
Maverick spending can take many forms; purchasing outside of the preferred channel or supplier, or those that do not follow the setup contract rules and miss on hard negotiated savings. Ineffective purchasing also comes with a range of other issues, e.g problems with payments, supplier management, fraud or difficulties enforcing the terms of business. Large amounts of these purchases happen because employees or their local managers think their transaction is insignificant or it does not matter to the overall picture.
SourceDogg helps you to take measures to get maverick spending under control. Here are some examples:
P2P policy needs to be clear and need to be communicated
A strict policy must be enforced by the management, with clear and understandable rules on how/when Business Users are allowed to make the purchases. The easiest way to buy something is to simply call a favourite supplier and place the order, so this will be the behaviour that will need to change, and it will require a commitment from the management of the company. Business users will need a simple and effective solution to replace such behaviour and Guided Buying could be that solution.
We offer a customisable front page of your organisations procurement platform that can become the wiki of procurement activity for every user. The content will include the links to 3rd party suppliers’ catalogues such as Amazon for Business, internal links to policy documents and customisable questionnaires that will direct the user to relevant requisition forms or RFx forms based on what they need.
Tailor the P2P processes
It could be argued part of the maverick spending happens because the Business Users do not know or understand the policies in place, resulting in looking for simple solutions for their pending problems. The users do not know where or how to buy the products they urgently need and therefore are going for the simplest possible solution. One size does not fit all in the P2P, you should, therefore, have designed processes for buying various types of products or services. For example, buying the raw material needed for production does not follow the same process as buying indirect services.
In SourceDogg you could address this by creating a range of very specific and customisable requisitions forms to match every type of spending that occurs in your organisation. Each of these forms could have a different set of approvers, and therefore relevant people will be deciding about purchases for their assigned category, meaning that no money is spent on something that is not needed.
Better Supplier Master Data management
In many cases, maverick spending outside the approved supplier list occurs because the user does not have enough information about the products available from existing Suppliers. Therefore, they reach outside of the approved circle and make a purchase from a supplier who is not verified and no or very little business terms have been agreed.
We recommend using the functionality of SourceDogg and saving relevant information about individual suppliers in their supplier profiles. The information collected could extend from basic contact information to categories of products or services provided. It is also possible to build a catalogue of products or services datasheets, currently available from your existing supply chain. Using this feature, the user can find the supplier selling the product they are looking for in a matter of seconds. From there, they can create a requisition, get it approved by their manager and generate a PO (threshold and permissions permitting) or ask the procurement department to tender for the product.