What is ‘rogue spend’?
maverick and tail spend are common terms in the procurement business, and they
all mean roughly the same thing – unexpected, unpredictable or unorthodox
sort of spending can happen when purchases are made outside of agreed supplier
contracts, often ignoring defined procurement processes. There can be a number
of reasons why a department may choose not to adhere to agreed processes:
the process itself is difficult, time consuming or poorly
constructed/ineffective, employees may choose to find other ways to purchase
believe that they are in fact saving the company money by using a different
process or supplier. This may be true, in which case there should be a process
implemented to allow employees to submit their suggestions to improve the
process, or it may be due to a lack of understanding on the employee’s part, in
which case better education is in order.
may simply be that the employee is unaware of a standard process or existing
contract for the particular product they need. In this instance it is important
to make sure that it is easy for employees to check this information, sometimes
What effect does rogue spend have on
spend can act like an invisible leak, draining your financials and causing real
headaches in both finance and procurement departments. Rogue spending can also
increase compliance risk – something no business wants!
Impacting Profit: It is unlikely that a rogue spend
will produce the same preferred terms or prices as a negotiated contract – you
will usually end up paying more, which could impact your profits negatively.
Impacting Contract Fulfilment: Some contracts will have minimum order
requirements and if these are not fulfilled (due to employees purchasing
outside of agreed suppliers) this could lead to a broken contract and potential
damage to a relationship with a preferred supplier.
No contract? No legal protection
spend usually occurs with no contract in place with the supplier. With no
contract, there is no legal protection if the supplier were to provide a
substandard quality of work or were to go out of business part way through the
spending can create division internally, between your own departments and
teams. Keeping to your agreed parameters for a project keeps everyone on the
same page and reduces the chances for misunderstandings.
How can I prevent or reduce rogue
first step towards solving the problem of rogue spend is to conduct an audit to
identify where the rogue spend is, and what is causing it.
the audit has been completed, it’s important to start tracking spend, and
making sure that no payments are being made to suppliers no longer on your
list, and that the correct timesheet amounts are being paid, for example.
key to make sure that identifiable individuals are accountable for any rogue
spending, and to put processes in place to ensure that the occurrence of rogue
spend is extremely unlikely, and that any effects are mitigated.
can help to keep trach of all spend, and centralise the authorisation of any
spending. A Vendor Management System (VMS) is likely your best option for this
your time-sheeting process, and in particular the approval process. It is vital
to ensure that incorrect, incomplete (or even fraudulent) timesheets are never
processed, but that there is a process in place to bounce these back for
the most effective tool is regular, precise and informative communication. It
is important to communicate with all stakeholders in the hiring process to
reiterate the importance of keeping spend under control, and the benefits of
this control in making sure that they get the right talent at the right price,
and ideally with budget left over. Regular refresher training on your procurement
process for those dealing with suppliers can be a good idea.
to monitor spend and relevant policies, and conduct regular reviews to keep
things up to date and on track.
spend can be damaging to your business, but with good procedures in place it’s
are just the broad strokes of the kind of process it’s important to put in
place to prevent rogue spend. If you’d like more information or advice tailored
to your business, get in touch with Will Dennis, our Workforce Solutions Development specialist at Volt
Consulting Group (VCG), for a chat about how we can help you put a policy in
place for your business with one of our Managed Service Programs (MSPs).
Call Will on +44 (0)7980 685017 ☏ +44 1737 236 816 or send an email to email@example.com