Maverick Buying: Ways to Identify & Stop Maverick Buying
We have authored many articles on Maverick Spending in the past, and yet we are to discuss it again to help you find information not too deep into our blog archive. We know how frustrating it can get to have unauthorized expenses exhaust your budget and flout your compliance. And with such concern in mind, we take you through Ways to Identify & Stop Maverick Buying.
What is Maverick Buying?
When someone from within the organization purchases a product without involving the procurement department, it is called Maverick Buying. Maverick Buying doesn’t take into consideration the entire purchasing procedure and disregards any price comparison, negotiation, or contract agreement. You can also read the genesis of the concept here.
Identifying Maverick Buying
Identifying maverick buying is not easy and requires a systematic approach to analyzing spend data. Below, we’ve listed a few steps to analyze spend. Once the analysis is ready, it can help bring down Maverick Buying.
Steps to Identify Maverick Buying
Severity of On-demand Purchase
Firstly, it is essential that a report is generated to understand the severity of On-Demand purchases. Higher the spend on less severe On-Demand purchase; higher is the rate of maverick buying.
No. of Communications
Secondly, when procurement happens in compliance with internal policies and procedures, the volume of communication is lesser when compared to uncontrolled purchasing. Tracking this can give some insight.
No. of Invoices Processed
Thirdly, a greater the number of invoices processed per supplier, higher the chances of Maverick Buying
Fourthly, the procurement team is always in the know of its core suppliers. A drop in this number may be a prompt to check if they are doing off-contract business with anyone outside the procurement function.
Fifthly, another way to track Maverick Buying is by comparing the ratio of contract versus non-contract agreement.
No. of Contracts Renewed
Finally, if there’s a noticeable dip in the number of existing contracts versus renewed contracts, you can track such figures as well. It could reasonably indicate your suppliers involved in off-contract transactions with people outside the procurement function.
Steps to Stop Maverick Buying
The procurement function is prone to Maverick Buying when visibility is low. You can control maverick spend through greater spend visibility. An estimation of the cost of maverick buying is an excellent premise to start. Conduct spend analysis audit to identify loops across spend data categories so you can come up with a suitable action plan to increase visibility.
We have to identify why employees settle for out-of-procurement purchasing practices, which is mostly because of obsolete technology. Upgrade to eProcurement software which is easy-to-use and factors in both direct and indirect spend and seamlessly integrates with an existing ERP. This way, employees who resort to maverick buying will be encouraged to follow standard practice.
It’ll not be right to expect every employee to know about the cost involved in invoice and payment processing or expense reimbursement. Here, as a designated purchasing manager, you may consider educating the employees about “WHY” they should be compliant with your purchasing procedure. Regular sessions will help reengineer the overall purchasing behavior of the company.
We understand that as a purchasing manager, it is virtually difficult to assume full responsibility for controlling Maverick Spend. Yes, if the situation is hard to manage, initiate a dialogue with the remaining decision-makers to explain how the management of Maverick Spend is of shared accountability. Employees need to be aware of available discounts to prevent paying a full price elsewhere.
a) Convene a meeting to eliminate the usage of P-cards as such transactions are difficult to monitor. b) Standardize supplier onboarding procedure and limit access to indiscriminate onboarding of new vendors. c) Place a C-suite approval metric for all non-contract and out-of-supplier-network expenses.
Indeed, in the business of procurement, we cannot allow whimsical expenses. More than the financial aspect, which is, of course, the primary concern, Maverick Buying may lead to lawsuits and therefore, reputational damage. Therefore, the steps discussed in this article are therefore going to be useful in helping you track and tackle the various challenges with Maverick Buying.