Maverick spend costs organizations millions of dollars in lost savings, it impacts budgets because it bypasses negotiated contracts and supply agreements, and additionally creates significant compliance risks.
This article examines:
- The 6 common types of maverick spend
- The 5 key reasons it occurs
- Then looks at 6 types of technology that can help to combat it.
By implementing the right digital tools and strategies, procurement leaders can dramatically reduce non-compliant purchasing, while also improving user experience and spend visibility.
What Are The Types Of Maverick Spend?
Maverick spending appears in many forms across organizations. Let’s quickly explore the main types you should watch for:
1. Non-Approved Suppliers
This happens when stakeholders buy from vendors not already registered in your accounting or ERP system. It can lead to commercial issues, quality problems and legal risks. Additionally, your team might miss out on better terms negotiated by procurement with their approved suppliers.
2. Non-Compliant Purchases
These are transactions that break a company’s procurement rules due to them not progressing through the usual approval workflows. This usually happens when a requisition and PO were not created. Instead, the invoice is sent to Accounts Payable without the necessary approvals. “After-the-fact” orders are by their very nature non-compliant.
3. Off-Contract Purchases
When employees buy outside existing contracts, costs are typically higher than pre-negotiated rates with approved suppliers. Losing out on negotiated discounts and favourable terms ultimately undermines the good work that procurement has done.
4. Urgent Orders
Urgent orders usually bypass normal approval channels, resulting in the non-compliant purchases we mentioned in point 2. Last-minute purchases also often come with premium prices.
5. Non-Standard Payments
Some payments happen outside of the normal financial processes. Whether it’s non-PO spend, cash payments, or perhaps an unauthorized agreement to pay a supplier on non-standard or non-approved terms. This not only makes spending harder to track and analyze, but can also create blind spots in your financial reporting.
6. Exceeding Budget
Spending beyond approved budgets without permission can cause financial strain and impact cash flow projections. Clear approval limits and blocks on purchases above these levels can help to prevent these overruns.
5 Reasons Why Companies Suffer From Maverick Spend
Maverick spending happens in most organizations for several key reasons. Some employees prefer handling their own contracts without involving procurement. This can be a consequence of either confusion or lack of awareness of the process, or even wilfully ignoring the established procurement procedures.
1. Decentralization
Decentralized operations often create maverick spend problems. Different teams or locations may manage purchases independently. Corporate procurement might negotiate a master contract, but individual manufacturing sites or country offices may not use it. This results in fragmented purchasing decisions.
2. Weak Purchasing Controls
Poor purchasing controls allow maverick spend to flourish. This issue typically manifests in two ways:
- Lack of Centralized Systems – Without a unified purchasing system, routing spend to preferred vendors becomes challenging. This problem is common in companies formed through mergers or acquisitions. Different systems across locations make consistent policy enforcement difficult.
- Inconsistent Purchasing Processes – When organizations lack standardized buying procedures, maverick spend increases. Each location might follow different processes, leading to off-contract spending. Even with standard policies, inconsistent implementation creates problems.
3. Poor Standardization
Without standard product specifications, maverick spend becomes inevitable. Consider IT hardware as an example. If you have no laptop standard, employees might buy models not carried by your preferred vendor. This issue affects many categories, especially MRO items like gloves or screws.
4. High Indirect Spend
Manufacturing companies focus controls on direct materials, limiting maverick spend opportunities. Service businesses like software companies deal mostly with indirect spending. This diverse spending is harder to standardize and control. More indirect spend generally means more maverick spend risk.
5. Business Type Constraints
Some business models naturally create maverick spend situations. Field service operations offer a good example. Technicians often need unexpected materials at customer sites. They must purchase from local stores when needed. This represents a genuine business need, though it bypasses preferred vendors.
How Technology Can Help Reduce Maverick Spend
Of course, our goal is to look at how digital procurement tools can help you to reduce the likelihood of maverick spend in your organization. Completely eliminating unauthorized spend is probably not a realistic goal. However, by embracing technology, it’s easy to take steps to drastically radically maverick spend.
1. Better UX at the Point of Intake
Modern procurement platforms now offer consumer-grade experiences that employees actually want to use.
These systems make finding and ordering approved items simple and fast. Clean interfaces guide users through compliant purchasing paths without confusion. Mobile access allows employees to make purchases from anywhere at any time. Smart search features help users find exactly what they need without frustration.
Built-in approval workflows keep purchases compliant with minimal effort.
Access to these platforms through integrations with Slack or MS Teams reduces friction even further. Personalised catalogues show relevant items based on each user’s department and role. Real-time inventory visibility prevents unnecessary duplicate purchasing.
The best systems require little to no training, removing barriers to proper procurement.
When the official way becomes the easiest way, maverick spend naturally decreases. Companies report higher adoption rates when systems prioritize user experience. Complicated systems drive employees to find workarounds outside approved channels.
2. AI-Driven Sourcing and Negotiation for Non-Complex Items
Autonomous sourcing tools now handle routine purchasing tasks with remarkable efficiency. They can source common supplies at optimal prices without human intervention. Machine learning algorithms track market changes and adjust purchasing strategies accordingly. This ensures your company always gets the best deals on standard items.
AI negotiation assistants can engage with vendors on non-complex items and services. They analyse historical pricing data to identify fair market rates instantly. Some platforms can even conduct simple negotiations through automated communications. This frees procurement teams to focus on strategic, high-value activities instead.
Smart systems recognize spending patterns and suggest consolidation opportunities. They can spot potential maverick purchases before they happen. AI tools provide recommendations based on similar organizations’ purchasing behaviours. They also flag unusual spending that might indicate policy violations or fraud.
These technologies work 24/7, ensuring consistent policy application at all times. The result is faster procurement with better compliance and lower costs.
3. Harmonized Process and Interface Across All Business Units
Technology can create a unified procurement experience throughout your organization.
A single platform used by all departments eliminates confusion about proper procedures. Common interfaces ensure employees face the same process whether in finance or operations. This consistency makes compliance the path of least resistance.
Cloud-based systems allow easy access for all locations without complex IT setups. Global businesses can incorporate local requirements while maintaining core standards. Role-based permissions ensure everyone sees only what they need for their specific job.
Multi-language support removes barriers for international teams. Currency conversion happens automatically in the background. Customizable workflows adapt to different business units while preserving compliance guardrails. Centralized data collection enables company-wide spend analysis and reporting.
When employees move between departments, they already know how to make compliant purchases. This harmonization dramatically reduces the excuses for going outside approved channels.
4. Using Process Mining to Discover Hotbeds of Non-Compliance
Process mining tools analyze your actual procurement workflows, not just the official ones. They reveal where maverick spend really happens in your organization. These systems identify bottlenecks that drive employees to seek purchasing shortcuts. They can pinpoint specific departments or individuals with high rates of non-compliance.
Advanced analytics compare performance across locations to spot troubling patterns. Visualization tools make complex spending data easy to understand and act upon. Root cause analysis helps determine why maverick spending occurs in specific areas.
Process mining creates a feedback loop for continuous improvement. It measures the effectiveness of your compliance initiatives over time. It can automatically alert managers when non-compliant behaviours spike.
Some systems even predict where problems might develop based on changing conditions.
This technology shifts your approach from reactive to proactive compliance management. With real data on non-compliance patterns, you can target interventions where they matter most.
5. Leverage Vendor Lifecycle Management Software
Vendor lifecycle management (VLM) platforms track every aspect of supplier relationships. One of the most critical areas that maverick spend impacts is contract leakage.
They can monitor actual purchases against contracted terms in real time. These systems can track spending that occurs outside negotiated agreements. This enables calculation of the exact financial impact of contract leakage across your organization.
Automated alerts notify procurement when spending patterns deviate from contracts. Dashboards show which departments or users frequently bypass preferred suppliers. Contract performance and rebate management tools compare negotiated versus actual pricing on every purchase.
Integration with payment systems ensures invoices match contracted rates. Some platforms even track supplier performance metrics to justify contract compliance.
These tools create transparency that makes maverick spending outside of agreed contracts much more difficult. With VLM software, companies typically recover 3-5% of their total spend through better contract adherence.
6. Niche Category-Specific Software for End-to-End Requirements
Specialized procurement tools address unique needs that generic systems often miss. Category-specific software understands the nuances of different spending types. These tools incorporate industry standards and best practices for each category. They capture the detailed specifications that matter for complex purchases.
- For IT purchases, specialized platforms track licenses and prevent duplicate subscriptions.
- In facilities management, category tools connect maintenance schedules with parts ordering.
- For professional services, specialized software aligns deliverables with statement of work details.
These niche solutions can also connect directly with supplier systems for seamless ordering. They include category-specific metrics and KPIs to measure performance. They can enforce unique approval workflows based on specialized compliance requirements.
The deep functionality encourages users to stay within approved systems.
When employees find tools that truly fit their needs, maverick spend becomes unnecessary.
