How to avoid maverick spend

Maverick spend is used to describe the purchase of services or goods that do not adhere to a company's defined procurement policy. It is often due to the purchase of goods from a non-approved vendor that fails to benefit from the discounts negotiated with approved vendors.

Ultimately, maverick spend can refer to any unjustified expense made by an employee on behalf of the company. It is not necessarily malicious and often occurs due to inexperience or ignorance.

Even though maverick spending is not intentionally harmful, it can still have a negative impact on a business. Here we look at the harm maverick spend can cause and how your business can avoid it.

Maverick spend risks

It is important for the financial health of any business to eliminate maverick spend, even though it tends to get less attention than other hidden business costs. This is because purchasing goods or services either out of contract or from non-approved vendors means your company isn't benefiting from approved vendor discounts. While a one-off purchase in this manner might not have devastating consequences, the costs will mount up over time if the practice continues.

What can be even worse is the harm done to the relationships your company has cultivated with your approved vendors. It could affect future contract negotiations, especially if the vendor knows that your company purchases similar goods from other vendors without a discount.

What's more, maverick spend is bad business practice and allowing it to go unchecked can lead to other bad business practices becoming part of the company culture.

How to avoid maverick spend

The key to eliminating maverick spend lies in having a stringent procurement policy and a monitoring system that keeps every expense visible and accountable. Here are the steps required to avoid maverick spend: 

• identify maverick spend

• review and clarify the procurement policy

• establish accountability for expenses

• implement real-time spend tracking

Identify maverick spend

Firstly, find out how much maverick spending has already happened. You should also understand why it happens, as a solution may be immediately apparent. For example, maverick spend could be due to one employee not fully understanding the procurement policy.

Review and clarify the procurement policy

Once you understand how much maverick spend is happening and have ascertained as many reasons as possible, it is time to review your spend policy. Make the policy absolutely clear and ensure every employee with spending responsibilities is fully updated with the clarified policy.

Establish accountability for expenses

Each employee with access to company credit cards must be accountable for every expenditure they make. There should be no problems if all such employees follow the clarified procurement policy to the letter. Still, there must be a system in place to identify those continuing to maverick spend.

Implement real-time spend tracking

Tracking spending in real-time means any instance of maverick spending will be immediately flagged and the culprit identified. The alternative is waiting until the end of the month, when it may be more challenging to determine who was responsible and why.

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