SaaS Management
• 8 min read
Maverick Spend - The Ultimate Guide (Causes and Ways To Avoid It)
31st July, 2023
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Maintaining a strict grip on corporate budgets is a top priority for finance leaders. However, one persistent challenge often arises: maverick spending, where employees deviate from pre-approved purchasing guidelines, leading to unforeseen costs that can significantly impact your organization's financial health.
Fortunately, proactive measures can be implemented to effectively combat maverick spending. Let's explore what maverick spend is, its causes, and the best practices to help you avoid it.
As a finance or procurement manager, you understand the significance of every penny when it comes to your organization's financial health. The success of your business relies heavily on your ability to manage finances efficiently.
Now, picture this: You've been newly appointed as the finance manager at a company, and you are eager to make a significant impact on its financials. As you delve into the procurement records, you encounter an alarming pattern—a series of unaccounted purchases without apparent justification. Delving deeper, you discover that this issue is pervasive, affecting a significant portion of the company's expenses.
This phenomenon is commonly known as ghost spend or ‘maverick spend,’ and it can have disastrous effects on your company's cash flow and overall operations. Maverick spend can occur intentionally when employees take advantage of loose spending controls to indulge in personal expenses or inflate budgets. Alternatively, it may happen unintentionally due to inadequate tracking and oversight.
As a procurement manager, eliminating this maverick spend and preventing its recurrence falls on your shoulders. Establishing robust spend management processes ensures that every penny is accounted for and allocated strategically to align with your company's goals.
Avoiding maverick spend is crucial for organizations seeking better financial management, maintaining compliance, and safeguarding their reputation. By implementing stringent procurement policies and providing comprehensive employee education on their importance, you can mitigate the risks associated with uncontrolled spending.
3 Key Causes of Maverick Spend in the SaaS World
Maverick spend can be caused by various factors. Let’s discuss the different causes of maverick spending in detail.
1. Lack of communication and awareness
Lack of communication and awareness can cause confusion and misunderstandings among employees, resulting in non-compliance with procurement policies. For instance, employees may not be aware of the preferred vendors, pricing agreements, or spending limits, leading to purchases that the company does not approve. This can significantly affect the company's bottom line, especially if these purchases are made in large quantities.
To avoid such situations, you must foster a culture of communication and awareness. This can be achieved through regular training, email updates, or webinars informing employees of the company's procurement policies and procedures. Doing so makes your employees more likely to comply with the policies and avoid maverick spending.
Furthermore, having open communication channels between employees and the procurement department can go a long way in preventing maverick spend. Employees can raise any concerns or questions they may have, and the procurement department can provide clarification on any issues that may arise. This can help ensure everyone is on the same page and working towards the same goals.
2. Disregard for procurement policies and procedures
Procurement policies and procedures are implemented to ensure that purchases are made transparent, efficiently, and cost-effective while complying with regulatory requirements. Unfortunately, employees who ignore these policies and procedures expose the company to numerous risks and negative consequences.
For businesses, maverick spend can be detrimental to their bottom line, especially in today's highly competitive business environment where every dollar counts. It can increase the cost of goods or services, significantly impacting the company's profitability. Furthermore, it can also affect the ability of the company to deliver on its promises to its customers, leading to a negative impact on the company's reputation.
Moreover, it is essential for you to establish a culture of compliance with procurement policies and procedures to mitigate the risk of maverick spend. This involves ensuring that employees are well-trained on procurement policies and procedures and are held accountable for following them. This way, employees are more likely to understand the importance of these policies and follow them to avoid any negative consequences.
3. Personal gain or convenience
One of the major causes of maverick spending in organizations is some employees' tendency to prioritize their personal gain or convenience over following the company's procurement policies and procedures. This behavior can manifest in various ways, such as employees opting for non-preferred suppliers or acquiring goods and services not approved by the company's procurement guidelines.
While seemingly insignificant, this trend can profoundly impact an organization's financial health, particularly if it becomes widespread. Repeated purchases that deviate from procurement policies strain the organization's budget, resulting in overspending, reduced profits, and potential financial crises.
To address this issue, it is vital for you to focus on educating employees about procurement policies and highlighting the benefits of adhering to them. By fostering an understanding of these policies, employees can make more informed purchasing decisions that align with the company's strategic goals and financial stability.
Implementing an approval process for procurement purchases can serve as a safeguard against unauthorized spending. This process ensures that all purchases undergo evaluation, allowing employees or admins to identify the best available options while maintaining compliance with procurement policies.
5 Common Ways to Avoid Maverick Spend
To ensure smooth operations and maximize profitability, it is vital to address the issue of maverick spend effectively. By implementing the following strategies, you can enhance compliance, reduce expenses, and foster stronger relationships with suppliers, thereby positively impacting the company's overall performance:
1. Communicate procurement policies & procedures
Are you tired of employees making hasty and unauthorized purchases, leading to maverick spend and wreaking havoc on your procurement process? Providing clear and concise guidelines on procurement policies and procedures ensures that everyone in your organization understands the proper purchasing process.
By effectively communicating these policies and procedures to everyone in your organization, you can ensure that every employee understands the proper purchasing process. No more unauthorized purchases or surprises that disrupt your workflow. Instead, you'll establish a transparent, fair, and cost-effective system for procurement.
Consider the financial benefits. Employees who make unauthorized purchases might miss out on discounts or alternative suppliers that could save your company money. Providing access to comprehensive information empowers your employees to make informed decisions about their purchases. This leads to cost savings and maximizes your budget.
But there's more. Avoiding maverick spend not only saves you money, but it also reduces legal and financial risks for your organization. By consolidating purchases and negotiating better prices, you can improve supplier relationships and ensure a steady supply of high-quality products and services.
So, if you're tired of the headaches caused by maverick spend, start by communicating your procurement policies and procedures clearly and effectively. It's a simple yet effective way to streamline your procurement process, save your company money, and strengthen your overall supply chain.
2. Educate employees on the importance of compliance
Compliance is not just a buzzword but a critical aspect that demands attention. By effectively educating employees on the importance of compliance, you can proactively prevent violations, unethical behavior, and fraudulent activities that pose risks to your company's reputation and financial well-being.
One way to cultivate compliance awareness is through targeted training sessions tailored to your employees' needs. During these sessions, you can provide practical examples and insights that resonate with your team, illustrating how compliance directly impacts the company's financial bottom line, reputation, and trustworthiness. Connecting the dots for them enables employees to recognize the implications of maverick spend and its far-reaching consequence.
These examples can shed light on the costs of resolving legal or financial disputes, revenue losses, and reputational damage arising from non-compliance. By vividly portraying these potential outcomes, employees gain a deeper understanding of the gravity of maverick spend and its detrimental effects on the company.
Furthermore, it is crucial to establish a clear reporting process that empowers employees to flag any potential instances of maverick spend. Encourage them to come forward and provide them with the necessary tools and resources to report violations easily. This proactive approach allows your organization to identify and address compliance issues before they escalate, safeguarding your company's integrity and financial stability.
3. Implement a system for tracking & managing spend
If you’re aiming to enhance financial performance and operational efficiency, it is imperative to implement a robust system for tracking and managing spend. By utilizing specialized software or tools designed specifically for this purpose, you can identify areas of potential overspending and consolidate procurement activities to reduce costs.
Establishing a centralized procurement team can streamline the entire procurement process, ensuring effective coordination and management of all activities. This dedicated team can negotiate better pricing and terms with suppliers and vendors, resulting in substantial cost savings and strengthened business relationships.
But that's not all. Regularly reviewing and analyzing procurement data empowers your team to detect instances of maverick spend. These incidents can lead to significant cost overruns and increased risk. However, with a comprehensive spend management system in place, you can swiftly identify and rectify these issues, ultimately bolstering your bottom line.
Overall, investing in a reliable system for tracking and managing spend is a strategic decision that can significantly improve your company's financial health and operational efficiency. With the right tools and an efficient team, you can effectively manage procurement activities, identify cost-saving opportunities, and drive improved business performance for sustainable success.
4. Develop a culture of accountability & transparency
Accountability and transparency are fundamental elements of any successful business. Establishing a culture of accountability and transparency within your team ensures that every employee understands and can take ownership of their roles and responsibilities.
To achieve this, it is essential to define clear roles and responsibilities for everyone involved in procurement. By doing so, every team member will be well aware of their tasks and who is accountable for each aspect. However, it's not solely about allocating tasks; effective communication is equally vital. Encouraging open communication and transparency in all procurement activities guarantees that everyone is well-informed and any potential issues can be promptly addressed.
But here's the important part: holding employees accountable for non-compliance with procurement policies and procedures. If someone goes off-script and makes an unauthorized purchase, they need to know that there will be consequences. This isn't about punishing people - it's about creating a culture where everyone understands the importance of following the rules.
So, if you want to avoid the horror of maverick spend, start by building a culture of accountability and transparency.
5. Engage suppliers in strategic relationships
It is essential to cultivate strategic relationships with suppliers to effectively manage spending and drive organizational success. Instead of merely engaging in transactional buying and selling, forging long-term partnerships with suppliers can yield significant benefits for both parties involved.
Developing a strategic supplier relationship entails beyond the usual transactional buying and selling approach. It involves fostering a deep understanding of each other's goals, challenges, and strengths. This collaborative approach allows you to tap into the expertise of your suppliers while also providing an avenue for suppliers to contribute to achieving mutual objectives. By working hand in hand, both parties can optimize operations, reduce costs, and enhance the overall quality of products or services.
Sustaining the strategic relationship requires a consistent review and evaluation of supplier performance. This encompasses assessing suppliers' adherence to procurement policies and procedures and measuring the quality of their deliverables. Through regular monitoring, you can ensure that they are receiving the utmost value for their investment and that suppliers are consistently meeting expectations.
By actively fostering strategic supplier relationships, you can effectively mitigate maverick spend, identify cost-saving opportunities, and drive continuous process improvements. This collaborative approach can enable you to achieve your procurement objectives while forging mutually beneficial partnerships with suppliers.
How Zluri Helps With Maverick Spend
Are you tired of battling maverick spend and its detrimental effects on your organization's financial health? Look no further than Zluri, the leading SaaS management platform designed to empower organizations like yours in optimizing SaaS spend and eradicating maverick spending through targeted data-driven strategies.
Zluri offers a tailored approach that analyzes your specific SaaS requirements and delivers strategic recommendations perfectly aligned with your organization's needs, budget, and usage patterns. With Zluri, you can confidently make informed decisions, ensuring you only invest in the applications you truly need while avoiding unnecessary or duplicate expenditures.
In addition to streamlining your procurement process, Zluri empowers you to negotiate better deals and forge stronger relationships with your vendors. The platform equips you with two essential negotiation strategies: Zones of Possible Agreement (ZOPA) and Best Alternative To a Negotiated Agreement (BATNA).
Zluri's advanced analytics capabilities enable you to identify the ZOPA swiftly, helping you establish the maximum price you're willing to pay for an app. By leveraging this knowledge, you can ensure your negotiations stay within your budgetary constraints and align with your company's goals, safeguarding you from overspending. With Zluri, you gain a competitive edge, allowing you to confidently navigate negotiations and secure win-win outcomes.
When it comes to BATNA, Zluri simplifies the process by enabling you to compare quotes from multiple suppliers effortlessly. By evaluating different pricing options upfront, you can select the most advantageous deal for your organization. This ensures your employees remain within approved vendors and pricing ranges, preventing maverick spend and unnecessary expenses. With Zluri, you gain access to a wealth of market insights, enabling you to make well-informed decisions and obtain the best value for your investments.
Zluri doesn't stop at cost optimization; it provides you with comprehensive visibility into your SaaS usage and subscriptions. By monitoring app usage, Zluri identifies underutilized, abandoned, or duplicate applications, allowing you to streamline your SaaS stack. You can eliminate waste and optimize your resources through efficient SaaS management, resulting in significant cost savings for your business.
Managing vendor relationships and contracts is a breeze with Zluri. Its centralized dashboard allows you to monitor all your SaaS vendors and contracts effortlessly. Say goodbye to missed renewal dates; Zluri provides timely notifications, ensuring you never overlook an important deadline. By automating your SaaS experience, Zluri liberates you from vendor relationships and contract management burdens, enabling you to focus on your core business functions.
When you partner with Zluri, you gain access to an array of tools and expertise designed to eliminate maverick spend through data-driven decisions, expert negotiation, efficient SaaS management, and comprehensive contract and vendor management. Rest assured that your SaaS spend is fully optimized, delivering the best possible value for your money.
Experience the power of data intelligence and expert support with Zluri. By optimizing your SaaS stack, you can save up to 50% on your subscriptions, all while alleviating the headaches caused by maverick spend. Take control of your procurement process today by booking a demo with Zluri, and start saving now!
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