A quarter of indirect spend occurs without financial oversight

Over three-quarters of chief procurement officers and chief financial officers say more than a quarter of indirect spend at their firms happens without financial oversight. According to further research from procurement consultancy Efficio, nine-in-ten of those leaders said ‘maverick spending’ was a leading cause of ‘cost leakage’ – something which is increasingly risky in an uncertain global market.

Financial oversight is pivotal in steering organisations towards fiscal responsibility and long-term sustainability. Undertaking work to ensure this should be seen as essential for a firm’s success. The insights of professionals crunching the numbers, and ensuring a company is on solid financial footing, can identify cost-saving measures, new revenue streams, and avoidance of financial pitfalls – such as accounting black-holes, or tax and compliance blind-spots.

This translates to different responsibilities throughout an organisation. Financial oversight from the perspective of a CFO entails a bird’s-eye view of the company’s financial landscape and making strategic decisions that align with the organisation’s goals. Meanwhile, a budget analyst will need to apply meticulous examination of spending patterns and recommendations for financial allocations. Finally, an auditor usually focuses on compliance and accuracy, ensuring that financial statements reflect the reality of a company’s situation.

Failure to reckon with any of these fronts can have dire consequences for a company – especially as the world’s economies encounter a sustained era of change. With the situation changing daily, suddenly acting without oversight is increasingly risky for businesses at the cutting edge of the economy. But despite this, new research from procurement and supply chain expert Efficio has painted a damning picture of financial oversight in leading companies.

Efficio surveyed 300 CPOs, CFOs, and senior leaders in companies across UK, Germany, Nordics and France with sales of £1 billion or more. The data revealed that 85% said more than a quarter of their indirect spend happens without financial oversight. As a result, just 19% of respondents said they were “fully confident” that they had an accurate picture of their organisation’s indirect spend.

Unaddressable?

According to Efficio, indirect expenditure represents nearly half of a company’s total spend, this presents an extremely worrying situation – with significant amounts of money at play, and with little to no planning involved. Worse, most respondents seem resigned to this fact; with 89% of senior leaders claiming that over half of indirect spend is “unaddressable”, and implying most of this expenditure is simply out of reach. This may be because of the areas the spend is linked to – 81% said IT and software was the riskiest department for cost leakage – and as firms continue to compulsively shovel capital into AI’s furnace, there is some perception this can’t be helped.

Even so, there are plenty of course of action CFOs and CPOs might still try, if they really feel something needs to be done. Efficio found that a mere 19% of senior leaders even held an annual review process in place for indirect expenditures, which the experts asserted could save an extra 15% of indirect spend wastage alone.

This lack of oversight is not going unnoticed, though. A 93% majority of senior leaders acknowledged that indirect spend is – or should be – a board-level issue. Even among the 11% who don’t yet view it as a board issue, 4% say they plan to raise it at that level.

Tim von der Decken, vice president at Efficio, commented, “Organisations are under pressure to control costs and maximise efficiency, yet a surprising amount of indirect spend remains unmanaged. Much of what leaders consider ‘unaddressable’ may actually be controllable if they have greater visibility, structured review processes, and stronger alignment between procurement and finance teams. The challenge often isn’t the spend itself – it’s the lack of insight, governance, and accountability to manage it effectively.”