Maverick spending is proving to be one of the challenges facing the small and middle sized businesses in UK. It can however be viewed from an angel where it is advantageous to the company. However, when it comes to procurement, it is more of a problem than an advantage. Maverick spending is the instance where purchases are made in an organization without the procurement department being notified, or rather, being away that such kinds of purchases are taking place. It is also a practice that is usually out of the agreed contracts and poses a great risk to the existence of the business in the long run. A new research has come out to show that one third of the purchases that take place in businesses in UK occur without the knowledge of the procurement department. Some organizations even experience more than this figure and it is very challenging to do business in such kind of an environment.
Problems created by mavericks spending
There are numerous problems that arise due to maverick spending in an organization, increased cost of spending being among the major ones. The cost of purchases can be increased by over 40% due to maverick spending. This is quite a huge figure that can be of great burden to any organization, whether it is small or large. When all the purchases are done through the procurement department, then the cost will reduce by a large margin.
Maverick spending also stands to point out at communication problems within the organization. It is common knowledge that all the purchases in a business should be done under the supervision of the procurement department but if this is not happening, then it means that there is no communication between the involved departments. Some employees can go ahead and do purchases which have not been approved by the procurement department since they decided to bypass the whole laid down procedure. Laying down proper communication channels in the organization means that nothing is going to happen without the knowledge of the procurement department. The procurement should be aware of the behaviors of the employees for the organization to run smoothly.
There will also be time wastage trying to figure out the invoices that were being used in the purchases and balancing the accounts. This is precious time that could be allocated to perform other revenue generating activities within the organization. Maverick spending will have reduced the control the procurement department has over spending and purchases in that organization. With this idea in mind, there are bound to be many errors that will occur when the procurement department tries to put together the purchases from unknown suppliers.
Maverick spending is also a security risk to the business. In what sense? Hen purchases are being made outside the knowledge of the business, fraud is bound to happen and this can have a negative effect on the image of the business. No one has the knowledge of the cost of the purchases except the person that is making the transaction at the moment. Fraud is one element that downs many organizations in UK and it start with ignored issues such as maverick spending.
Tackling maverick spending
In order to tackle this issue, we need to identify the reason why it is actually happening in that business. That way, you can eliminate it completely. It is a source of many probes in the organization but it can also be used as a measure of highlighting some of the problems that are facing the organization. Tackling maverick spending head on will help eliminate this menace in a business once and for all. One way we can deal with this is to try and figure out if there is a single supplier that the organization can always purchase from or any approved supplier can also be used? This way, we will have defined maverick spending and thus it can be easy to try and tackle it. Identifying the real cause of this problem will help save the company a lot of money in the long run.
Maverick spending can occur deliberately or because an employee was not aware of the procedures involved in the purchasing within the organization. There are times when an employee will deliberate break the rules that have been laid concerning purchasing and involvement of the procurement department. Necessary action should be taken against such an employee once it has been proven that they broke the rules willingly. In other instances, a new employee may not have been told about the procedures that are involved in purchases or the procedures were hard for them to understand. Either way, it shows that there are flaws in your organization that require immediate attention. It can also be that your rules are unreasonable and that is why the maverick have decided to come up with their own set of rules.
To ensure that this does not happen again, always make sure that the rules are clear to all the employees and even to the new ones that are joining the organization so that no mistakes ae made. In addition to explaining the purchasing procedures to your employees, you can also use purchasing-to-pay technology to control the way the employees are spending in the organization. The procurement department will have greater access and view to the way purchases and payments are being done in the organization. This technology also simplified the purchasing procedure ad you will not have to worry about maverick spending any longer.