If your company’s finance and procurement teams had to pick one thing that wreaks the most havoc on their budgets and spend projections, it would probably be maverick spend.

Purchases made outside of approved procurement processes or from non-contracted suppliers can lead to numerous issues, including inflated costs, missed savings opportunities, compliance violations, and increased operational risks.

Conversely, organizations that actively work to minimize maverick spend can avoid or mitigate all these problems.

That’s why we’ll explore the top benefits of reducing maverick spend and share practical tips on how your company can achieve them.

Increased Cost Savings

Expectedly, maverick spend often results in higher costs due to your company missing out on volume discounts or negotiated pricing with preferred suppliers.

Therefore, reigning in maverick purchases ensures your company can save a lot of money.

To illustrate, imagine a situation where some office supplies, despite their procurement being contracted with a specific supplier, are being bought off-contract.

Even if the prices of office supplies purchased this way were lower than the negotiated rates (which is rarely the case), this would still be problematic.

Why?

Because several critical issues arise from such purchases, according to procurement leaders surveyed in Basware’s 2019 Report on Maverick Spend:

Illustration: Veridion / Data: SDC Exec

As these figures show, the impact of maverick spend includes everything from decreased purchase volume, leading to reduced negotiation leverage with preferred suppliers to higher processing costs due to quality and service issues when unapproved suppliers fail to meet your company’s performance standards.

Thus, even when the price of a maverick purchase suggests potential savings, these broader issues make the practice far more costly in the long run.

In fact, another study revealed that the losses of negotiated savings can amount to anywhere from 5% to 16%. In other words, if you reduce maverick spending, you’ll increase your negotiating power and save up to 16%. 

As you can see, there’s a lot to gain from reducing maverick spending in your company. 

Now, let’s explore potential ways to do that.

For starters, establishing clear procurement policies and communicating them across your organization is crucial.

This is because most maverick spend transactions occur when employees:

• don’t understand the procurement policy,
• find the process too complex to follow, especially when under time pressure.

To simplify this, investing in an e-procurement system is a powerful maverick-reducing action. 

Below is an example of one. 

Source: Ignite Procurement

Such systems digitize all purchases and automate workflows, ensuring that all transactions are tracked and approved.

This makes it easier for employees to follow procurement guidelines, significantly reducing off-contract purchases.

Additionally, proper training is essential.

Employees should be well-versed in using these tools, with regular refresher courses or updates when policies change.

This approach helps minimize resistance and maximizes compliance with procurement policies.

Clear policies, strategic technology adoption, and ongoing education are key levers in controlling maverick spend and increasing cost-savings.

Better Spend Visibility

Efforts to control maverick spend lead to greater transparency and visibility into purchasing data, which enables better budget management and more accurate spend forecasting.

Of course, this can feel like a chicken-or-egg situation.

In other words, you need visibility into spend to identify and control maverick purchases, but that visibility often improves only after maverick spend is brought under control. 

Regardless of which comes first, spend visibility and maverick purchases are closely linked—improvements in one lead to improvements in the other.

However, achieving full spend transparency and preventing maverick buying comes with its own challenges.

For instance, here’s what procurement leaders surveyed by SpendHQ identified as the main barriers to spend visibility:

Illustration: Veridion / Data: SpendHQ

As shown, nearly half of procurement leaders cite non-integrated data sources and incompatible systems as the primary barrier to spend visibility.

Inconsistent processes and poor data quality also rank high, which further complicates efforts to increase spend visibility and detect rogue spenders. 

Luckily, today we have many technology tools that can integrate disparate data sources and enable detailed spend analysis. Those tools are essential to streamline spend analysis.

Once spend data is cleansed and consolidated, spend analytics solutions can be used to analyze spending patterns and detect maverick spend.

Sievo is one example of such a solution. 

Source: Sievo

Whether deployed as a standalone solution or part of an all-in-one procurement management platform, spend analytics tools allow your team to:

• consolidate spend data from multiple sources,
• classify spend into clear categories,
• track spending in real-time,
• identify maverick spend.

Then you can, for example, detect departments with higher maverick rates and set appropriate spending limits or pre-approvals.

Additionally, this enhanced visibility into both historical and current spend allows your team to improve company-wide and procurement-specific budgeting and forecasting.

Again, whether you start to reduce known maverick spend or detect how much maverick spend exists in your company, both efforts lead to the same result: better spend visibility.

This comprehensive analysis of all spend can also reveal the unknown, i.e., previously hidden inefficiencies that can ultimately be turned into cost-savings.

How? By bringing more spend under procurement’s control and improving compliance, which is the next benefit on our list.

Improved Compliance

By definition, any maverick purchase violates internal procurement policies and contracts or fails to adhere to external regulations, including legal, financial, and sustainability standards. 

Therefore, reducing maverick spend improves internal and external compliance, reducing the risk of failing potential procurement audits and facing legal issues.

Given the potential consequences of non-compliance range from minor disruptions to product recalls and reputational damage, it’s no surprise that procurement leaders cite compliance among their top priorities.

Moreover, they spend a considerable amount of time on risk and compliance management issues, as evidenced by a 2021 Deloitte global survey of chief procurement officers (CPOs):

Illustration: Veridion / Data: Deloitte

This strong focus on compliance by CPOs reflects the significant impact that non-compliant purchases—whether they violate internal policies or external regulations—can have on a company.

Internally, maverick purchases may bypass supplier contracts that guarantee specific quality or sustainability standards, leading to defective products or failure to meet environmental targets.

Even more critical consequences can follow. 

In tightly regulated industries like pharmaceuticals or aerospace, a single instance of non-compliance can trigger audits, product recalls, or even halt operations entirely.

To illustrate one such non-compliance case, let’s recall this situation in the Pharma industry:

Source: The Legal Journal

The manufacturer of the medication mislabeled hundreds of bottles, posing a danger to consumers. What’s worse, this wasn’t the first time this company mislabeled their products. 

Now, just imagine you ordered these products from this supplier off-contract. It would cause a lot of complications. 

This case highlights how non-compliant purchases can lead to costly disruptions and reputational damage.

To avoid such issues, procurement teams need to implement solutions that not only detect and prevent maverick spend but also ensure compliance with internal and external regulations.

One effective approach is to adopt procurement automation tools that enforce pre-approved purchasing workflows.

These systems can automatically flag or block purchases that deviate from established contracts, ensuring compliance at the point of transaction.

Furthermore, such tools can provide compliance management features that help companies stay up to date on evolving regulations, reducing the risk of legal penalties. 

Here’s one such solution.

Source: Zycus

In addition to that, you can use supplier management platforms to actively monitor supplier performance, and ensure suppliers meet the agreed-upon quality and delivery standards.

Combine that with the spend analysis mentioned earlier, and you have another piece of the puzzle.

By gaining visibility into non-compliant transactions, your team can pinpoint departments or individuals that are bypassing procurement processes and take corrective action.

Overall, when these tools are coupled with clear procurement policies and guidelines, this creates a comprehensive approach to reducing maverick spend and improving compliance.

Stronger Supplier Relationships

Essentially, any off-contract, unauthorized, or non-compliant purchase takes away valuable business from your contracted and approved suppliers.

So, when maverick purchases are prevented and redirected to your preferred suppliers, this strengthens those relationships.

More specifically, your approved suppliers may receive more consistent orders or see their contracts expanded to cover additional product categories.

This opens the door for many potentially positive outcomes, such as better terms, receiving priority service, and enhancing collaboration for future projects.

Additionally, by rooting out maverick purchases, you consolidate spend with fewer suppliers.

This simplifies administrative processes and further strengthens partnerships with those selected suppliers.

You gain more leverage in negotiations, leading to potential cost savings. This is something that Michael Dolan, Project Manager at Smarter Grid Solutions, agrees with:

Illustration: Veridion / Data: LinkedIn

Of course, evaluating supplier performance is an essential part of this consolidation process.

As Gabriel José de Souza, a strategic sourcing expert, points out:

Illustration: Veridion / Data: LinkedIn

These KPIs will help ensure your suppliers are complying with contractual obligations and meeting your company’s expectations.

At the same time, this will foster employees’ trust in established procurement processes, leading to better adherence to the set purchasing guidelines, i.e., less maverick buying.

Of course, implementing a digital supplier performance management system to track suppliers is highly recommended.

Such systems can store supplier data, track KPIs over time, and provide performance analytics and reports. 

This simplifies the whole process and lets you identify areas where some suppliers might need help to make improvements.

That’s when open and transparent communication comes into place. 

Clear lines of communication foster trust and enable proactive problem-solving, whether it involves product quality, delivery schedules, or unexpected challenges.

It is crucial for maintaining strong supplier relationships.

Over time, these stronger relationships can lead to greater innovation and responsiveness to your company’s evolving needs.

Minimized Risks

When maverick spend is under control, this means more of your suppliers are properly vetted and approved.

This, in turn, reduces risks and improves the overall reliability of your supply chain.

Since maverick purchases often come from unvetted suppliers or outside agreed terms, they pose financial, operational, and reputational risks for your company.

For example, unverified suppliers may deliver subpar materials that don’t meet the expected quality standards, which can disrupt production and have serious financial and reputational repercussions.

Additionally, off-contract purchases expose you to a higher risk of fraud, which can even cause issues with your own suppliers.

Unfortunately, it’s a quite common issue.

According to TrustPair’s 2023 survey on B2B payment fraud, almost 40% of organizations experienced issues with their suppliers as a result of fraud incidents.

Illustration: Veridion / Data: TrustPair

This high percentage of payment fraud causing supplier issues primarily stems from the fact that, when fraud takes place, legitimate suppliers don’t receive the payments they’re owed.

Of course, the other impacts of fraud that surveyed organizations reported should not be underestimated.

So, what can you do to manage these risks?

First, ensure that all your suppliers are properly vetted not only at the time of selection but throughout your business relationship.

To do this effectively, you’ll need a system that centralizes and verifies the information provided by your suppliers and can integrate with a reliable source of external supplier data.

Having accurate and up-to-date information from external sources acknowledges that supply chain risks extend beyond a supplier’s performance and financial stability.

On that note, consider using Veridion’s data service.

Whether you need to quickly find suitable suppliers, enrich your supplier data with the most up-to-date information, or monitor supplier risks in real-time, Veridion can assist you.

Source: Veridion

With access to Veridion’s global, regularly updated, database of millions of suppliers worldwide, your team can:

• discover suppliers that meet your specific criteria in minutes instead of weeks,
• enrich your supplier profiles with the latest data and set regular updates,
• automatically monitor supplier risks by defining risk factors and getting real-time alerts.

These abilities have several upsides.

For instance, you can ensure that all purchasing decisions are based on vetted and verified supplier information, which reinforces your procurement processes.

This, in turn, leads to greater compliance of your employees, ultimately preventing maverick spend.

Additionally, with real-time risk monitoring and comprehensive supplier insights, you can proactively address potential issues before they escalate, ensuring a more resilient supply chain.

Source: Veridion

Of course, other procurement risk management systems can be used to, for example, set up approval workflows for non-standard purchases.

Lastly, we advise educating employees about the risks associated with maverick spend. 

Once they understand all possible repercussions, their perspective will change and they will be more inclined to use approved suppliers.

When done properly, this can foster a culture of accountability and compliance, further minimizing maverick-related risks to your organization.

Conclusion

Unmanaged maverick spend can wreak havoc on your company’s procurement strategies, negatively affecting both productivity and profitability. 

Conversely, by taking control of this spend and reducing maverick purchases, your organization can unlock numerous benefits, from increased savings to minimized risks. 

Achieving this requires leveraging advanced procurement tools and adopting smart, compliant organizational practices.

Ultimately, these steps can ensure greater procurement efficiency and stronger supplier relationships.