A recent poll on maverick spending showed strong interest in learning more about the topic.
This follow-up article explains what it is, why it occurs, and how organisations can address it.
Understanding Maverick Spending
- Definition: Purchases made outside approved procurement policies or preferred-supplier agreements, usually by employees acting independently of established processes.
- Common Causes: Complex approval requirements and decentralised purchasing processes can encourage employees to bypass established procedures.
- Budget Impact: Maverick spending can erode potential savings by up to 16%, weaken volume discounts, and create financial blind spots.
Example
A marketing manager, for example, might subscribe to a design tool without following the approved procurement process. Similarly, a salesperson might book a flight outside the company travel platform for convenience.
Impact
Each purchase may seem reasonable in isolation. Together, however, these transactions create a category of spending that finance teams struggle to identify, forecast, and control Maverick spending can remain hidden for months, often surfacing only when finance detects it or a department exceeds its budget
Possible Solutions
The right response depends on the organisation’s needs, but effective measures generally include:
- Simplify purchasing from approved suppliers: Remove unnecessary steps so employees can make requests easily without being delayed by excessive red tape.
- Educate employees: Explain both the required procedures and the purpose behind them.
- Clarify preferred-supplier arrangements: Ensure employees know which suppliers are approved and understand the applicable terms and conditions.
- Deploy digital catalogues: Create internal marketplaces that display pre-approved items, preferred suppliers, and current contracted prices.
- Automate workflows: Use e-procurement software to digitise requisitions, route approvals promptly, and generate purchase orders automatically.
- Establish clear policies: Define spending limits, purchase-order requirements, and rules for urgent or one-off exceptions.
- Build collaborative relationships: Work closely with business units to understand their needs and improve compliance.
- Issue controlled purchasing cards: Provide authorised employees with cards subject to strict category and spending limits for minor ad hoc purchases, while maintaining visibility.
- Accelerate approvals: Streamline requisition and ordering sign-offs to reduce unnecessary delays.
- Analyse spending data: Monitor transactions in real time to identify non-compliant patterns, track policy exceptions, and uncover recurring process gaps.
(Karl) Furrutter & Associates can help organisations plan for contingencies that may disrupt normal operations. As procurement strategists based in South Africa, we support clients locally and globally. Contact us at enquiries@furrutterandassociates.co.za.