Businesses usually have a procurement procedure for procuring items, products, and services. Companies want their staff to spend company money carefully and carefully. This is easier said than done. From our experience working with various organizations, most have some spending that hasn't been approved by their procurement team or a budget holder. Maverick spend can cause financial and most importantly reputational harm to organizations.
Analyzing any company's spend data will reveal an 80:20 tendency. 80% of the spend will go to the top 20% of suppliers, while 20% will be dispersed over several. These 20%-spending items are generally too tiny for procurement and too rare for cataloging. This tail cost is hard to monitor for procurement since they rarely see it. However, tail spend may not constitute maverick spend.
2. Maverick spend
Businesses usually have a procurement procedure for procuring items, products, and services.
Companies want their staff to spend company money carefully and carefully. This is easier said
than done. From our experience working with various organizations, most have some
spending that hasn't been approved by their procurement team or a budget holder. Maverick
spend can cause financial and most importantly reputational harm to organizations.
3. Maverick spending trends
Our clients often ask us, “what trends do we see with maverick
buying” from our Spendkey expenditure analytics platform
deployment. We have observed trends in temporary staff or
contingent labor, technology, and office supplies, but there is no one
size fits all answer. With cloud technologies and agile development,
we have seen multiple cases where the business case for migration
from the on-premise data center to the cloud displays huge savings
but the organization does not reap those benefits. This often
happens because developers spin up new cloud servers and services
without explicit governance. This can increase cloud costs, which are
often hidden because employers can buy these services on their own
credit cards and charge them to their companies.
Is Maverick Spend the Same as Tail Spend
4. Is Maverick Spend the Same as Tail Spend
Analyzing any company's spend data will reveal an 80:20 tendency. 80% of the spend will
go to the top 20% of suppliers, while 20% will be dispersed over several. These 20%-
spending items are generally too tiny for procurement and too rare for cataloging. This
tail cost is hard to monitor for procurement since they rarely see it. However, tail spend
may not constitute maverick spend.
5. Controlling erratic spending
“What gets measured improves.” Modern Management's father, Peter Drucker
To make your maverick spend transparent and visible, use a spend analytics tool like
Spendkey to detect spending patterns and trends across your organization. For instance,
tracking contractual versus non-contracted spend, PO versus non-PO spend, credit card
or P Card purchases, budget versus spend, etc. These findings from the expenditure
analytics tool might inform your policies and strategies.
6. Controlling maverick spend has further benefits:
1. Cost savings (most obvious!)
2. Better expenditure management visibility and control
3. Reporting and data quality improved
4. Reduced risk
5. Less management overhead
6. SLA and compliance enforcement improved
Data enrichment, uniform classification, automation, AI, machine learning, and predictive
analytics are changing how companies optimize third-party spend on goods and services.
Detecting and fixing spend leakage is a vital tactic for companies to stay ahead of the
competition.