What is maverick buying, and how to stop it

For procurement and finance leaders focused on improving spend management, maverick buying is a key focus.

Maverick buying, or when businesses make purchases outside the established procurement policies, occurs more than you’d think. Companies lose as much as 20 percent of targeted savings because of maverick spending.

When left unchecked, maverick buying’s increased costs open you up to more risk and negatively impact profitability, the exact opposite of what procurement is all about.

Learn what maverick buying looks like and discover five powerful approaches for tackling out-of-policy purchasing to improve your spend management practices.

What is maverick buying?

Maverick buying is purchasing that happens outside your established policies and processes.

It goes by several other names (maverick spending, dark spending, or rogue buying) and predominantly occurs when people feel there isn’t a clear path to getting what they need.

They might, for instance, think the lengthy sourcing process is too convoluted for what could be a relatively straightforward purchase, so they opt to avoid the red tape and bureaucracy.

Or, they might make a buying decision under the pump and determine that acting fast is more important than following the established procedure.

Maverick buying is of particular concern regarding purchasing software, which companies increasingly sell on a subscription basis.

Picture this example.

One of your sales reps is at a conference and needs to purchase a new software tool for their upcoming presentation. They put the purchase on their corporate spending card and make a mental note to cancel the subscription after the conference.

Of course, this gets forgotten, and they never report the purchase to IT. The sales rep eventually leaves the company, and that subscription renews without IT, finance, or sales leadership knowledge.

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How does maverick buying hurt your company?

Increases procurement risks

Maverick spending ignores the established buying policies, which means risk mitigation procedures like vendor vetting generally don’t occur.

A procurement risk could mean, for example, that teams purchase a new software platform without the consent of IT, who never got a chance to determine whether that tool complies with your data protection protocols.

Hides overlapping licenses

Overlapping software licenses is an all too common consequence of maverick SaaS buying.

For example, say the leaders of your sales and customer service departments each purchase a messaging tool to improve customer communication. In doing so separately, they bypass the established purchasing systems, and you end up with two licenses for similar products. That means two contracts, two sets of software security risks, and two vendor relationships to manage.

If buyers made these purchases using the appropriate workflows, the procurement team would have flagged a similar product and avoided the duplicate purchase.

Harms procurement KPIs

The more maverick buying takes place in your organization, the harder it is for you to control and manage procurement KPIs such as:

• Procurement cost reduction
• Purchase order coverage
• Price competitiveness

Increases costs overall

The cumulative impact of the problems caused by maverick buying is increased total spending.

Procurement leaders cannot negotiate better deals because the purchase occurs outside their view. Overlapping licenses go unchecked. Security risks lead to data breaches and costly fixes.

As a result, your company pays a higher price for everything you purchase, harming profitability.

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Five approaches for tackling maverick buying

1. Create and communicate clear purchasing policies

The first step in reducing the prevalence of maverick buying is to ensure that everyone understands the rules.

Begin by establishing and documenting clear purchasing policies. If you already have buying processes in place, use this as an opportunity to audit existing workflows and adjust where required.

Make sure these policies outline:

• When individuals have decision-making authority and when they need to escalate a purchase request
• The processes people need to follow in each circumstance, such as how to create a purchase order request
• How procurement specialists should assess risks and vet vendors
• The information your procurement team needs from business units to make informed decisions

The second step is ensuring the policies are widely distributed (procedures are of little use if nobody knows that—or where—they exist).

A tool like Vendr helps store, manage, and implement all your procurement policies. As a single source of truth that protects you from lapsed renewals, duplicative purchases, and maverick spending, Vendr helps reinforce your ideal process.

2. Implement procedures for enforcing policy compliance

It's not enough to assume that employees will follow policies just because they exist.

You need to find effective ways to enforce purchasing compliance. The best way is to make the process as easy as possible.

For example, templates for documents like RFPs (request for proposals) ensure that such formal documents include the correct information and allow your team to work more efficiently.

Use procurement software platforms to create automated approval workflows—another timesaver and compliance hack—and risk matrices that make it easier for buyers to answer the question, “What risks might occur if we partner with this vendor?”.

3. Create an approved vendor list

An approved vendor list is a simple document that details all of the suppliers you’ve already vetted and assessed for risk and with whom, more often than not, you’ve already done business.

This list makes it easy for those responsible for purchasing to make fast decisions and reduces the need for lengthy approval processes (one of the reasons why maverick buying occurs in the first place).

It also means you can prepare a backup supplier for your business-critical purchasing (a strategic sourcing best practice) to prevent panic buying. If your primary vendor faces a supply chain shortage or cannot fulfill an order, you can quickly revert to your backup.

Preferred supplier lists are beneficial in the context of software vendors, where security and data risks are of significant concern and, therefore, include lengthy vetting procedures.

You might, for example, already use HubSpot as your sales CRM. As your company grows and you need to build a customer support team, the sales team leader will look for a tool to manage support tickets.

With HubSpot already on the approved vendor list, the sales team leader can move much more quickly, opting to use HubSpot’s support platform for this purpose.

4. Find the right balance between centralized and decentralized purchasing

Businesses can take two approaches to their purchasing.

A centralized approach is when a central procurement department handles all buying. Decentralized buying is the opposite—the leaders of individual branches or departments own purchasing.

Each has its benefits.

Centralized purchasing is generally safer from a risk standpoint, allows companies to take advantage of economies of scale, and comes with greater compliance with purchasing policies.

However, decentralized purchasing allows teams to get what they need faster. And because they are often experts in what they’re buying (like a marketing manager sourcing a new social media automation tool), they’re more likely to end up with a product that truly suits their needs.

You don’t need to choose one approach over the other, however. In many cases, a hybrid buying style is appropriate.

For example, you might have a centralized purchasing team for supply chain and business-critical purchasing, while department leaders are allowed to procure software platforms specific to their team, provided they get prior approval from the CIO.

5. Use software to improve spend visibility

You can’t improve what you can’t measure, so the last step in the fight against maverick buying should be to set up a tracking method for all company spending.

Use your procurement platform to create a custom report in your spend analysis dashboard to ensure you have real-time insights into

• Spend by employee and department
• Maverick buying as a percentage of total expenditure
• Where each new purchase request is in your approval workflow

Control maverick buying with Vendr

Tackling non-compliance with purchasing policies requires those in charge of your procurement function to be on top of all company spending.

You need to be able to break down spending data by department, category, or employee and quickly spot purchases that haven’t gone through appropriate approval workflows.

Vendr is the SaaS buying platform procurement professionals use to control costs, cut spending, and improve vendor relationships.

With Vendr, your purchasing department:

• Uses procurement process automation to ensure formal documents like purchase requisitions always reach the appropriate stakeholders for sign-off
• Relies on contract management processes to ensure vendors comply with negotiated contracts (minimizing the likelihood of emergency spending)
• Drives supplier relationship management with a user-friendly reporting dashboard
• Spots overlapping spend to consolidate software licenses and reduce the impact of maverick buying that has already occurred

Discover the true impact of maverick purchasing on your bottom line with our free cost savings analysis.

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