Maverick spend doesn’t promote efficient Procure-to-Pay processes or strategic supplier relationships since it takes purchasing outside the realm of your company’s e-procurement system. It doesn’t promote contractual compliance and it undermines trust and transparency.
Whether you call it maverick, indirect, rogue or tail spend, “it’s the same challenge and leads to the same results–wasted money and greater risks of non-compliance. Smaller purchases add up…without the proper processes and procedures, money will continue to be wasted to the tune of millions…”
Victor Manganaro, August 16, 2017, Technology Concepts Group International
When you don’t reign in rogue spending, companies lose discounts, requisition and approval processes lose meaning, preferred, go-to suppliers are left out in the cold, leaving it difficult to forecast need, strategies and budgets.
The Costs of Maverick Spending
Indirect spend can represent 15 percent to 40 percent of revenues for most companies. In an ideal world, achieving 10 percent savings on that spend could yield a 1.5 percent to a 4 percent in bottom-line margin benefits. Typically most companies achieve only a fraction of these potential savings.
Much of this spending is because individual departments have unwritten rules about making small purchases or think that those small purchases will be inconsequential to the bottom line. The real bottom line becomes the lack of transparency, increasingly inefficient P2P processes and supplier strategies that lead to no cost savings.
Indirect costs of unmanageable spending are:
- Supplier Key Performance Indicators aren’t met
- Transactions fall through the cracks that have to be managed later
- Contract discounts remain underutilized
- P2P professionals spend unnecessary time resolving issues related to maverick spend
- Higher overall transaction costs and personnel resources drained
Unmanaged spending means undermanaged P2P processes, non-collaborative supplier strategy and loss of revenue. Educating both stakeholders and employees on the direct and indirect costs of maverick spend is key to curbing it.
Plugging Maverick Spend Leaks
Analyze your company’s gaps in spending. Which departments go rogue? What kinds of purchases are tracked and who’s accountable for approvals and spending? There’s usually no malicious intent with venturing outside a company’s procurement system. Maybe that’s the way it’s always been done–just pick up the phone and order and let accounting sort through the details. Maybe stakeholders and employees don’t understand the P2P process or their e-procurement system, if they have one. Once you have insight into the who, what, why and where maverick spend occurs you can begin to fix the leaks.
A BPI Solution: Purchasing Requisition and Approval Routing
Maverick spend costs businesses when they have to use their resources to manually record indirect purchases, potentially negating any initial cost savings. By implementing a highly configurable purchasing requisition solution, with automated approval routing, relationships with your suppliers are built and improved, your P2P processes become increasingly transparent and efficient, helping you to significantly cut down on Maverick spending.
Integrating iPurchase and iApprove
Our BPI solutions iPurchase and iApprove bolt-on to your company’s ERP and are 100 percent web/browser-based whether you use them on premise or in the cloud. They utilize our proprietary Advanced Approval Routing Technology (AART™) for seamless integration into your P2P process that’s highly configurable and scalable.
Training all stakeholders and employees on e-procurement BPI solutions like iPurchase and iApprove ensures that everyone is on the same page regarding company P2P protocol. When purchases go through the automated system and are routed for approval, your company gets maximum savings. The opportunity to deliver substantial bottom-line financial benefits through that savings in indirect spend categories is substantial.
Agile business environments are rapidly becoming the norm. Iterations provide cadence to the increasing need to reign in the unknown. Contact us to help analyze and plug those maverick spending leaks that are costing your business unnecessarily.