Spend Analysis

The Maverick Spends – A Resolved Quandary Can Lead to Huge Savings

Maverick spends need no introduction to anyone. No industry is an exception to this spend, and no sector claims permanent control over this spend. What is so intriguing about maverick spends? 

If we try to draw an analogy with ancient battles, maverick spends are those who do not account for factors such as the cost of extra fuel, ration, and opportunity cost spent for a last-minute change in the planned battle route. It is an expense made for uncalled public. They can tag it along with the soldiers such as their family members or allies made on the way. They can then negotiate beyond set limits in an attempt to strengthen the winning chances.

One can look at any activity which is unplanned, unaccounted, and poorly negotiated. This leads to maverick spend. Holistically, it is well-identified spend by procurement professionals, but how can this be permanently eliminated? Can it be?

Statistics:

According to PWC’s Economic Crime and Fraud Survey 2020, procurement fraud accounts for 17% of the total fraud value, and vendors/suppliers account for 19% of the total. One of the top 3 perpetrators is vendor/supplier, with 19% out of the total external perpetrators of 39%. 

It is pertinent to have purchase policies clearly defined by the management, having purchase workflows in place, and continual digital adoption should be a mandate. Although they know these things well, they are tough to implement. 

Covid-19 Crisis and Need to Identify Spend Areas

With the loom of Covid-19 engulfing the entire world, economies are shaking, and businesses are trying their best to stand firm in these terrible times. What is differentiating with this pandemic- which is probably the worst that the world has witnessed in this century- is, it is not only crashing the economies but also tearing the social fabric, with the health of people taking the utmost importance. 

It is unlike the other economic storms that have affected markets in the past, such as the Brexit or any terror attack. Today, corporates and especially the leadership, must take steps to minimize the negative business impact. They must ensure that they do not compromise their employees’ health.

It is a crucial and tricky situation that businesses are facing, and the first step they need to take is to cut down on spends – starting with the Maverick Spends! 

Following are some quick and basic steps any organization can put in place:

Accelerate Decision Making – Identify Spend Areas:

Organizations often have no visibility into their business spends. They might have categorized the spending inaccurately. It may lead to an increase in maverick spending. An efficient Spend Analysis software will come handy to any procurement professional to overcome these challenges. 

Spend Analysis software will bring in accuracy, consistency, timeliness, and detailed visibility into spending. Easy identification of maverick spends, and savings opportunities will lead to faster decision making. 

No Exception to the Rules – Clear Policies and Roles in Place: 

Any purchase request must come through the procurement department, and there cannot be any exceptions. Easy to use eSourcing Software will help companies to streamline sourcing requests coming across various departments.

The decisions will be those that are fact-and market-driven. This will also facilitate large scale sourcing projects with increased stakeholder participation. It can reduce sourcing cycles by 5-10%. Thus, they won’t process any request that comes from outside the software. Hence, it will not remain unidentified.

Fair Selection of Suppliers – Reduce Unnecessary Spends:

Once the sourcing request gets logged and approved in the eSourcing Software by designated approvers, it should be raised to registered suppliers only. A fair selection mechanism must be adopted using robust Supplier Management software, the one that helps in setting performance benchmarks and evaluating suppliers against them. 

It should manage the supplier onboarding process and organize all the updated information related to suppliers in a single place. Intelligent and accurate reports, dashboards, and other analytics for a comprehensive view and quick analysis of supplier performance will facilitate decision-making and risk-avoidance. It will again lead to a reduction in any maverick spends incurred during managing supply. 

It not only brings a fair selection process but also clearly highlights the best one to select. This ensures the best value for investment.

Contract Management – Indirect Benefit to Curb Maverick Spends:

Maverick spending has indirect effects, also such as damaging relationships with preferred vendors. Well-structured contract management helps organizations not to breach any contract terms, avoid getting into altercations with suppliers, and any legal battles with them. This can lead to maverick spends.

A strong contract management software will lead to enhanced stewardship, security, and continuity around important contract documents.

Using of e-Invoicing and e-Procurement as one unit:

Using these two in tandem will lessen the workload on the accounting team by improving the efficiency in invoice processing. This will reduced errors and ensure better turnaround time. It will also minimize the time, cost, and effort spent in investigating and revising the mistakes. It will also lead to suppliers accommodating the organization’s e-invoicing system doubling the benefits of automation investment.

The jury is still out there in terms of measuring the economic impact that COVID-19 will have on world economies. However, an economic slowdown has begun, and organizations across the globe must look at cutting down costs. 

Maverick spending can be curbed with having a robust Source-to-Pay Suite in place and making a timely investment in automating the procurement cycle to ensure long-term benefits with smart savings.

Learn More: Vendor Management Guide

Shalaka Wagholikar

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Shalaka Wagholikar

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