In our article “Five Ways Your Company Might Be Overspending,” we introduced our five-part series on identifying and ending overspending. In this article of the series, we go over the second of the five ways: Spending without approval — manifesting itself as the “maverick spender.”
How this overspend begins
In every company, there are always employees who feel that the rules don’t apply to them. When it comes to a company’s overspending problem, those people can materialize as what’s referred to as maverick spenders. These are employees who do whatever transactions they want, whenever they want, with whomever they want, without any regard to managerial direction or a need for approval.
What this overspend looks like
When people are running amuck with company transactions, the potential for overspending is huge. It can result from:
Using the wrong vendors. Other vendors might be offering bigger discounts than the ones the maverick spender chooses. There might be a grander, cost-saving agreement between a particular vendor and company. But, the employee might also be in the dark about that. So making such a decision without knowledge and without approval threatens the company’s ability to save money.
Buying at the wrong time. Many vendors have sales and discounts at very particular times of the year — and an experienced manager might know that. But the maverick might not. Perhaps it would be prudent to hold off buying a particular supply in the interest of saving money.
Higher costs. Simply speaking, a maverick who spends money without approval runs the risk of paying more. Management might have painstakingly investigated the vendors within various industries to learn how much to pay for certain products and what would be unreasonable prices. But, that maverick, who thinks he or she knows better, doesn’t consider that possibility — and yet, spends anyway.
Why this overspend happens
Maverick spenders can very easily have the best of intentions. But the good intentions don’t override the potential danger of overspending that results from employees doing their own thing.
For example, when trying to secure a good deal, time is often of the essence. Taking the time to contact a manager for approval before closing a sale might mean a missed opportunity. Rather than miss out, the maverick spender moves forward with the transaction on his or her own cognizance. There’s no use in bothering to search out additional, potentially time-consuming input. In the mind of the maverick spender, the right and just action was taken.
It could also be a matter of personality. The maverick spender believes that he or she knows best and is the right person to make the call. Why bother the boss, when the purchaser feels completely capable of making his or her own decisions regarding a transaction?
And, it could be a lack of knowledge and protocol. Procedures and policies might not be firmly in place, and even if they are, it could be they were never communicated sufficiently to the employees. So for the maverick spenders, it’s just business as usual for them. They don’t know any different.
How to end overspending by the maverick spender
Create, communicate, and enforce policies and procedures. To help maverick spenders stay in their lane, your company needs clear, enforceable policies and procedures. While policies alone might mean nothing to the maverick spender, consequences more likely will. So, once the procedures are in place and they have been communicated, they then need to be enforced.
Card Integrity can help your company track spending according to policies and procedures that can go to the heart of your maverick spending issue. Once monitored, we can then help you to communicate findings to management to provide them an opportunity to discuss with an employee the compliance issues. The communication is a first step toward effectively handling transactions without approval.
Moreover, Card Integrity can help you to educate your employees with customized online training to show cardholders how to handle spending properly, the reasons behind the policies, and what happens if the policies and procedures are not followed.
Identify spending habits. If you can see who the maverick spenders are and how they are behaving, you can be very deliberate and focused with your solutions. Card Integrity provides oversight of transactions and receipts that will help you pinpoint the behaviors, as well as the employees and vendors behind those actions, so that your response can be just as specific and efficient.
Develop relationships with “pre-approved” vendors. By supplementing the step of getting transactions first approved by management with pre-approved vendors, you beat the maverick spender at their own game. Work on pre-approving as many vendors as possible and then communicating that list to your purchasers. They can then move forward with more independence and autonomy. Meanwhile, the whole purchasing process becomes more efficient and streamlined as a result.
The silver lining of maverick spending
Research shows that there is a cost to rogue spending. As mentioned by Supply & Demand Chain Executive the purchasing can be slower and more costly. The good news about maverick spending is that acknowledging its existence opens the door to taking some very important steps: tighter controls, greater oversight, and a stronger emphasis on following policies and procedures. These steps can help the company’s financial health in ways that go beyond just the maverick spender.
There might also be an opportunity to learn. It’s easy to assume that the maverick spender is always in error for not toeing the company’s line. But these mavericks might have truly identified better vendors with whom to work and new ways of saving money — ideas that can improve how your company is conducting transactions.
So acknowledging and identifying maverick spending is an opportunity to ask questions about your current way of doing things, in order to improve your systems. It’s also a chance to create avenues that maverick spenders can use to communicate such ideas and unique pieces of knowledge in a way that works with the company’s purchasing functions, rather than competing with them.
To help your company from becoming the wild, wild west of overspending, contact us today by calling 630-501-1507 or via our online form.