Maverick spend

How maverick spending appears

Ever gone through the company accounts and found a raft of unidentified purchases?

“Ghost spend,” otherwise known as maverick spend, can be either intentional or accidental, and causes huge problems with cash flow and operations. It’s also incredibly common, even accounting for up to 80% of all expenses in a company without sound spend management processes.

Any good finance function should find better ways to identify and prevent maverick spend. This article helps you spot ghost spend and install better systems to eliminate it in the future. 

A maverick spending example

Let’s say that your procurement department has negotiated a discounted rate from a preferred supplier for a specific product over the next 12 months. But this month, someone from another team gains access to the company credit card and ignores the existing contracts.

They put in an order with an unapproved vendor, for the wrong volume of product. Since the credit card is shared, it’s not easy to identify who made the purchase, or why. Nobody is coming forward, either. 

Maverick spend has occurred not only in the fact that your employee hasn't ordered from the preferred vendor, but they've deviated from the general setup by ordering the wrong amount for the wrong price.

Unfortunately, these mistakes happen more than you think. 

6 ways to prevent maverick spend

Rogue spending may not happen all too often. But when it does, it can cause severe consequences within your business. Instead, you can implement specific systems, tools and processes to inherently prevent maverick spending. 

1. A clear expense policy

Outlining a clear expense policy is the most important function to help your finance department manage overall spending. Well-defined spending guidelines build controls for spending into the everyday process.

For example, your company expenses policy might outline details with regards to strategic sourcing, agreed contracts, purchase order approvals, or even office supplies. There are a number of helpful expense policy guides to help companies create the ideal protocol for their business.

An expense policy that prioritises clarity leads to healthy bank accounts without overspending. Plus, employees will know the boundaries of the policy without having to waste the finance team's time with simple questions. 

Remember, the more detailed and defined your procurement processes, the better the chance for the business to hit its spend goals.

2. Easy visibility into spend

With more awareness around the company's current and past spending patterns, the finance function can better guide purchasing decisions.

Moreover, spend visibility avoids staff making redundant or duplicate purchases, since they can easily see other purchase orders and ongoing subscriptions. 

Empower your employees with spend visibility to increase both transparency and accessibility. Analyze expenses at a granular level and create reports to highlight patterns, which then informs the aforementioned expenses policy. 

3. Employ real-time spend tracking

Too many financial departments make the mistake of waiting until the end of the month to begin tracking spending. This leads to rushed work and, of course, mistakes.

Instead, continuous financial management throughout the month lets finance teams identify errors immediately and begin rectifying problems before the consequences really begin. Furthermore, businesses who track spending in real-time are more adaptable towards overall strategy changes.

It’s an important part in the fight against maverick spend. 

4. Stop sharing credit cards

There’s a clear problem with shared company credit cards: they make your spending anonymous. Employees can hide behind the card, and it’s incredibly difficult to attribute purchases to specific personnel. Shared credit cards keep mavericks under the radar.

Instead, ensure every employee has their own expense card. The business won’t require a perfect credit score, and there is no way to exceed the spending limit (since they work like a debit card). Plus, since every employee has a different card, spending becomes totally transparent and trackable, down to the cent. 

The other major benefit for smart purchasing cards is that, since they belong to individuals rather than being shared between teams, you can control and adapt the spending rules for every employee. Expense cards turn your entire spending process on its head, in exactly the right way. 

5. SOP the living daylight out of your communication 

With automation, 57% of leaders say that they gain back between 10-50% in terms of cost savings. Standard operating procedures (SOPs) enable your business to template and automate its systems, including purchasing and procurement.

As such, employees rely less on the finance function, and they can find answers in the documentation first. 

Dependence on email chains or Slack is a sure fire way towards disaster. Instead, giving employees the tools that guide them through the process means that they onboard more quickly, and don’t have to bother finance teams at every bump in the road.

In theory, having clear systems and processes leaves no room maverick spend.  

6. Prioritize trust and control

With a true spend management system, your employees receive access to funds, but with the caveat of clear controls (so they really can’t mess it up!). Prioritizing trust makes the workforce feel valued, while also ensuring they toe the line in terms of company spending etiquette.

It also gives the finance team full control over expenses approval, denial and changes. Therefore, with discipline, the finance function can prevent maverick spend. 

How to eliminate maverick spend

The key to eliminating maverick spend lies in having a sound spend management system. It reduces risk, offers brilliant spend compliance, and can totally accelerate the overall efficiency of the business.  

But what does a good spend management system look like? 

First, every purchase can be tracked back to a user, including all of the specific data regarding date and time of purchase, along with a reason for spending.

Second, every transaction has to be approved before purchase - either automatically or manually by a budget manager. There are no shared credit cards, because every single employee has access to their own safe expense card with built-in limits. Finally, all of this occurs in real-time. 

Smart spend management essentially eliminates maverick spend overnight, along with a host of benefits for companies and their finance teams. You can have healthier spending processes without the fuss.