Anoek van der Riet
At nearly half of corporates, the majority of indirect spending does not take place under management, concludes the Digital Transformation Finance and Procurement 2023 Trend Report. Independent research firm DirectResearch surveyed more than 200 financials and buyers and found that Finance in particular experiences maverick buying as a problem.
Mainly indirect spending not under management
Maverick buying occurs when employees make expenditures on behalf of a company outside the established purchasing process. For example, when employees purchase goods and services from unauthorized suppliers or when they fail to meet established budgets and price agreements.
Direct expenditures are usually managed; it is mainly the indirect expenditures where employees still sometimes step out of line. Since some 20 to 40 percent of the total orders at a corporate involves indirect spending, its impact should certainly not be underestimated.
Inquiries by DirectResearch show that at nearly half of corporates (45 percent) the majority of this indirect spending is not under management. Thus, the share of maverick buying is significant.
Why minimize maverick buying?
Although some degree of maverick buying in a (large) company is almost unavoidable, companies do well to keep it to a minimum. There are a lot of drawbacks to it. In the case of maverick buying, for example, no favorable supplier terms are agreed upon, resulting in the loss of a substantial discount.
In addition, there is little grip on spending and Finance does not get the purchase on its radar until the invoice arrives. The employee then has to work manually to create a separate order for this and book it all in. A waste of his or her valuable time.
Maverick buying is also not compliant (since it deviates from established procedures) or transparent. The supplier is not vetted in advance, let alone approved, leaving you with no visibility into who your company is actually doing business with. This can be detrimental to, for example, your CSR goals or even the organization's reputation.
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Then read the article: 4 arguments for increasing spend under management |
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READING TIP - Finance experiences maverick buying as a problem
But who within the organization actually experiences the most hindrance from this? To find out, DirectResearch presented both financials and buyers with a statement. That yielded an interesting picture.
Among procurement professionals, a quarter of those surveyed (25 percent) agree with the statement "unmanaged indirect spending is a problem in my organization. A third (32 percent) do not think it is a problem and the rest are neutral.
While of the financials as many as half (48 percent) agree with the statement "invoices that are not preceded by an order or contract are a problem in my organization. 19 percent of financials think it is not a problem and the rest are neutral.
In short; Finance experiences maverick buying as a bigger problem than Procurement. One possible explanation is the difference in the amount of extra work it entails. After all, Financials have to do a lot of extra work manually when an invoice comes in for which there is no purchase order or supplier in the system.
For buyers, the disadvantages of maverick buying are less immediately felt; at least they don't have to do extra work because of it.
READ ALSO: How can corporate organizations prevent maverick buying?
Adequate attention within the organization
If so many employees perceive this as a problem, is action being taken to address it? Just over half of procurement professionals (54 percent) believe their organization pays sufficient attention to spend management. Only one in seven (14 percent) of the procurement professionals explicitly state that they do not pay enough attention to it. The other respondents had no clear opinion about this.
About half of the financials (49 percent) also indicate that sufficient attention is paid to reducing maverick buying. 17 percent of them say emphatically that there is insufficient attention to it. One-third are neutral.
In short; many corporates have to deal with a high proportion of maverick buying. Finance in particular suffers from this, partly because it causes them a lot of extra manual work. The awareness of the problem is there in most companies, now the only thing that really needs to be done is to get more indirect spend under management.
Full trend report available for free
Want to learn more about how corporates have structured their purchase-to-pay process and the implications for Procurement and Finance? Then read the full Trend Report Digital Transformation Procurement and Finance 2023.
In it you will read about, among other things:
- To what extent do corporates pay their invoices on time?
- How do purchase orders and invoices come about among Dutch corporates?
- What trends and developments affect Procurement and Accounts Payable?
Anoek
van der Riet
Contents Specialist
Anoek writes daily about purchase to pay, order to cash and Robotic Process Automation. She enjoys diving into topics such as e-invoicing, working capital and hyperautomation.