How to Combat Maverick Spending

Maverick v Iceman

Top Gun is an 80s classic which pitted Maverick, a rogue Naval aviator against Iceman, a play it by the rules fighter pilot. Whilst Maverick was the charismatic guy who got the girl, he’s also the type of employee who will hurt your business through reckless spend.

The Facts

As much as 2% of an organisation’s spend can be attributed to maverick spending*. This doesn’t sound like much but it equates to $100,000.00 if an annual budget is $5,000,00.00. There are clearly significant cost savings to be made which can improve the health of any organisation.

Evaluate

Before maverick spending can be combatted an analysis must be done to establish an organisation’s exposure to the risk and how widespread it is. To evaluate the risk the organisation must examine its internal processes – in other words, does the organisation have safeguards in place? A comprehensive spend analysis must be done.

Solutions

Once the problem and its extent has been identified, attention must be turned to possible solutions which can include one or all of the following:

1) Communication

Effective communication is probably the most important factor to take into consideration. It’s important to understand why people are spending recklessly or beyond their authority. It’s often because employees aren’t sure of their spend authority, a product catalogue is not available or simply that their job role is not clearly defined. Establishing good communication is an important first step to solving the problem.

2) Separation of Roles

Employees need clear purchasing parameters and not only limits or budgets. There needs to be a clear separation of powers between “requisitioners” and “purchasers” so that there is no overlap in purchasing responsibilities. This will help prevent those without proper authority from making maverick purchases.

3) Pre-Approved Suppliers

Having a list of pre-approved products/services and suppliers helps minimize spending beyond the needs of an organisation by removing the possibility of a purchase being made from an un-authorized vendor.

4) Purchase Tracking

Purchase orders (POs) should be used for every purchase. Without them, there is no way for an organisation to accurately track spending. For example, if an employee makes a purchase without a PO the organisation cannot know whether the purchased item(s) is correct in terms of description or quantity when received.

5) Digital Platform

The aforementioned solutions can be effectively implemented by using a single digital platform such as Procurify. The centralised system must ensure that the same processes are followed for every purchase which in turn will bring uniformity to the checks and balances used to control maverick spending. A sophisticated digital platform will also reduce the number of man-hours needed to police the problem.

*Hackett Group

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