Control of Your Vendor Master to Prevent Rogue Spend
Linda Wright (Consultant)
| Jan 19, 2012Do you control access to your vendor master to prevent "rogue spend"--unplanned/undisciplined buying across the organization?
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Answers
Company: Helm Inc
Linda
We do limit who can set up new vendors/suppliers/customers. In our case, there is paperwork that has to be submitted to get anything started. This both gives us a paper trail as well as identifies the purpose and material impact of the new addition (whether expense or revenue). Additionally, these items require sign off of both a department head and the head of our Finance & Accounting area.
Company:
Thanks for responding. That's how we did it too. We required a "sole sourcing" request to allow any one off (non-strategic partner) arrangement.
Company: TSI-Transforming Solutions, Inc
Sara
What's your experience (and I hope others weigh in too) on how this control reduces maverick/rogue spending? Do the senior managers/execs follow this policy as diligently as lower level managers, especially when it comes to discretionary spend (marketing, legal, professional, consulting)?
What level of post event approval (i.e. condoning the non-compliance after the liability has been incurred) have you seen?
What types of sanctions have you seen enforced (e.g. refusal to pay the invoice or delayed/discounted payment, etc)?
Company:
The pre-spend requirement to control adding inefficient or inappropriate buying is effective. However, we also coupled ithat requirement with post-spend, periodic audits and made it clear via internal communications that we were auditing. Together, those steps precluded "public hangings". We did contemplate denying payment, but working with all of the leadership team (VP's and above) did not have to go that far.
Company: KDR Designer Showrooms
Sara,
We do control access to the creation of new vendors and are fairly successful in controlling spending with them. In the case of post event approval, we may refuse to pay an invoice or at least withhold payment until the purchase has been reviewed. I believe the bigger issue with rouge spending is with company credit cards - that is an ongoing battle and much harder to control.
Company: Triplet Advisory Services
A well designed and thoughtful P-Card program actually reduces rogue spending by limiting card use to certain vendors, merchant categories and dollar limits, for low dollar, high volume goods/services! Proper policy, card use training, and program oversight, will ensure success thereby, limiting the need to ever add vendors for these most frequent purchases. It also reduces the txn cost significantly!
Company:
We also used the P-Card to selected appropriate buyers, dollar expenditure authorities and particular categories of spend. Thanks for responding.
Company: St. Dominic's Home
We carefully control company credit cards and have recently limited office supplies and household supplies to one vendor with negotiated prices and limited product selection At the outset we've set budget limits on the low side which require manual review and approval by finance dept to exceed. No budget carry over is allowed from month to month
We're also reviewing employee reimbursements to identify expenses that could have gone through the system that didn't... one warning... and then no reimbursement. We'll do the same with petty cash expenses and reduce petty cash balance to further eliminate rogue spending.
Also now we get one invoice pre coded which we can process much quicker than in the past.
Company:
Thanks for responding. Agree with everything you said--except recommend you get rid of petty cash. In my last corporate role, I did. (Also shifted down to one officer and household supplier for 100 national sites/offices. Worked beautifully.) Initially, as to the petty cash, you would have thought I had recommended death and dismemberment. In the next month, all was well.
We require the buyer to submit a request to add/modify a vendor that goes to AP. The AP mgr. reviews to see if vendor already exists and meets our requirements. If it does the AP mgr creates/modifies the vendor master and saves the submitted form.
We are revising our policy to include adding the name of a preferred supplier on the vendor master and having our ERP system check for it whenever a material or service is ordered. If an PO is created using an unauthorized supplier the system will block the order from processing until it is approved by someone designated in our delegation of authority.
Company:
That's just the way my group did it in my last corporate role.