How Does Maverick Spending Affect Your Business?

• Reading Time: 6 Minutes
• Published: November 10, 2022
• Last Updated: January 16, 2025

You have probably heard of the term “Maverick,” which is someone who is fiercely independent and doesn’t care what others think. They will go off on their own and make their own choices, even if they may be against the crowd. Businesses that spend money like a maverick are financially unpredictable. Businesses indulge in “Maverick Spending” when they make purchases out of the existing contracts with their suppliers. It gives rise to unauthorized expenditures, affecting the cash flow of your business. That is why maverick spending can be detrimental to your business. Therefore, it is important to set up a proper accounts payable process and strictly follow it to prevent your business from the side effects of maverick spending. You can hire accounts payable outsourcing firms to manage the process, reduce the burden on your personnel, and save costs. But before that, let us explore how maverick spending affects your business so you can avoid falling prey to this trap.

What is Maverick Spending?

Maverick spending is when you get involved in off-contract procurements for your business. Businesses usually have some suppliers for goods and services procurement, with whom they have long-term contracts. Whenever the need for goods and services arises, the procurement order is placed with one or more suppliers in the contract for the purchase. However, sometimes your business might place purchase orders without following the pre-established procurement policy and purchase from an off-contract supplier. This leads to unmanaged or rogue purchases known as “Maverick Spend.” It includes the purchases that have not been approved or sanctioned by the central procurement team or the relevant budget holder.

Why is Maverick Spending a Problem For Your Business?

Maverick spending can amount to as much as 80% of a company’s spending. If you have a high-risk business that is also rapidly growing, you could be particularly susceptible to maverick spending. Though buying from off-contract suppliers might not be a problem when the existing suppliers are unable to fulfill the order or when there is an urgency. It becomes a big issue and affects the business’s cash flow when the maverick spending becomes frequent. In addition to draining your savings and costing you time and resources, every maverick purchase undermines the impact of your procurement activities. It pushes your company away from the bottom line. The accounts payable outsourcing companies help recognize and take extra time and effort to manage and record the maverick spending.

The Reasons Why Maverick Spending is Bad For Your Business Include:

1. Too many vendors- A business always keeps a few vendors/suppliers under contract for the goods and services procurement process. But when you indulge in maverick spending, the number of vendors increases as many off-contract vendors/suppliers also get involved in your purchase and accounts payable process. It makes it difficult to manage the process smoothly.

2. Increased purchasing process costs- The numerous unauthorized and unmonitored rogue spendings lead to increased purchasing process costs due to unnecessary transactions. Not following the pre-established procurement process results in additional administrative overheads.

3. Contract crisis- When you have many unmanaged transactions and suppliers, there are higher chances of contract conflicts. It leaves your business exposed to many compliance risks. It also negatively affects supplier/vendor relationships and hampers interdepartmental cooperation.

4. Time wastage and reduced efficiency- When your business gets involved in maverick spending, your procurement personnel is always busy tracking and recording every unauthorized transaction and supplier/vendor. It causes time wastage as the working hours they put in tracking maverick spending can be used for planning and other business productive tasks. It also reduces your efficiency, affecting your business’s overall productivity.

5. Quality, service, and other issues from unapproved suppliers- The goods and services provided by the on-contract suppliers/vendors are approved by your business’s procurement team. However, in the case of maverick spending, the goods and services provided by the off-contract suppliers/vendors don’t usually match the quality, timeline, and price suitable for your business.

6. Dissatisfied internal customers- As the goods and services purchased under maverick spending are not as per your business’s approved levels, it leads to dissatisfied customers most of the time. Customers do not like anything less than they used to get. It negatively affects your customer satisfaction, and thus your profitability reduces.

Strategies for Avoiding Maverick Spending in Business

Though maverick spending affects the business negatively, it can’t be resolved overnight. These expenses mostly occur due to a lack of knowledge about the procurement procedure, or it can be a genuine mistake. There are a number of ways that you can reduce the amount of maverick spending in your business. You can do it in-house with the help of your personnel or go for accounts payable outsourcing services provider. They ensure that the procurement process set up by you is strictly followed while placing a purchase order. The outsourcing services providers are experts in their field and can easily track all the transactions and suppliers/vendors. However, if you want to manage the process in-house, the following are some of the ways that you can do this: –

Set up a budget and stick to it- A budget is a tool that helps you to put a financial plan in place for your business. By having a budget, you can identify where all your money is going and see if any areas are receiving much less funding than they need.

Keep track of your expenses- By keeping track of your expenses, you can identify any maverick spending that is happening in your business. With a little digging, you can discover if there is any spending happening in your company that isn’t necessary or you are not aware of.

Collaborate with your team- You can reduce maverick spending in your business by actively collaborating with your team. You can use tools like Slack and Google Docs to create discussions about your business and identify areas where you are spending money that is not necessary.

Look for ways to cut back on your expenses- One of the ways that you can reduce maverick spending in your business is by looking for ways to cut back on unauthorized expenses. If you discover that you are spending money on something unnecessary, you can try to cut that back. That way, you can reduce maverick spending in your business and ensure you are still getting everything that you need.

Understand that not all expenses are necessary- One of the ways that you can reduce maverick spending in your business is by understanding that not all expenses are necessary. Analyze every expense and sort them into necessary and unnecessary categories, do this stringently. This will help you understand whether your next purchase is a valuable addition to your business or not.

Conclusion

Businesses need to have a set procurement process, and everyone involved must also clearly understand it. However, even if you have a pre-defined procedure for goods and services procurement for your business, most of the time, everyone does not know about the process and its importance. The lack of awareness often leads to maverick spending. You must place some control methods and strategies to avoid maverick spending. Though it can be a genuine mistake sometimes, the less you indulge in rogue spending, the better it is for your overall business functioning and profitability.

One of the best ways to avoid this issue is to choose accounts payable outsourcing. The outsourcing services providers are experts and have experience dealing with these issues. They help make your procurement process smoother and faster. You can Contact Us if you want to outsource your accounts payable process and avoid maverick spending. We at Whiz Consulting offer expert accounting services to help you manage your accounts and relieve you from the stress of keeping an eye on every small detail so you can focus on enhancing your profits.

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