Maverick Spend
Summary Definition: Purchases made outside an organization’s approved procurement processes, often without proper authorization, preferred vendors, or oversight.
What is Maverick Spend?
Maverick spend, sometimes called rogue spend, occurs when employees purchase goods or services without using the company’s procurement system, failing to follow established approval workflows.
Some examples include ordering from a non-approved supplier or vendor, making business purchases with a personal credit card that bypasses the procurement team, and hiring contractors without creating an official purchase order (PO).
While these actions may seem harmless, maverick spending adds up, leading to inaccurate spending records, higher costs, and weaker supplier relationships. This, in turn, makes it harder for organizations to control budgets, negotiate better pricing, and effectively track overall spend.
Key Takeaways
- Maverick spend happens when employees make purchases outside approved procurement channels, often ignoring established supplier agreements or purchase order processes.
- Uncontrolled maverick spending can drive up costs, create compliance risks, and limit spending visibility across the organization.
- Managing maverick spending requires policy enforcement, employee education, and solutions that centralize and monitor spending data.
Why Does Controlling Maverick Spend Matter?
Uncontrolled maverick spend can disrupt an organization’s procurement strategy and lead to:
- Higher costs: Purchases made outside negotiated contracts may come at higher prices, eroding the organization’s cost savings goals.
- Reduced spend visibility: When expenses are made outside approved processes, the organization loses visibility into where and how money is being spent.
- Weakened supplier relationships: Ignoring preferred suppliers damages partnerships and reduces the company’s ability to secure favorable terms.
- Compliance risks: Bypassing the procurement process can lead to company policy breaches or regulatory violations.
- Operational inefficiency: Without proper tracking, departments may make redundant and unnecessary purchases, increasing administrative burden.
Why Does Maverick Spending Happen?
Maverick spending typically arises from a mix of operational inefficiencies, perceived urgency, and gaps in employee understanding.
When procurement systems are slow, overly complicated, or difficult to navigate, employees may bypass them to move faster. Conversely, employees may be unaware of the company’s procurement policies or the benefits of using preferred suppliers, making them less likely to follow the correct procedures.
Lacking robust spend management software can further compound these challenges by making it harder for organizations to track off-policy purchases and enforce compliance across departments.
What Kinds of Maverick Spending Are There?
Rogue spending is often categorized based on how much control and visibility an organization has over the transaction:
- Uncontrolled and unknown: These are the highest-risk transactions, where an invoice is received from a vendor the organization has never worked with, and no contract or purchase documentation exists.
- Partly controlled and partly known: The vendor may be known in this scenario, but the transaction details are unclear. For example, the invoice may lack specifics about the items or services purchased, who authorized the transaction, or whether it aligns with budget expectations.
- Partly controlled and known: Here, a contract and an approved vendor are in place, but gaps still exist, such as missing purchase orders, incomplete approval trails, or inconsistent use of procurement systems. While the supplier is legitimate, the lack of transactional clarity introduces compliance and reporting risks.
What is the Difference Between Tail Spend and Maverick Spend?
While sometimes confused, tail spend and maverick spend refer to two distinct procurement challenges.
Tail spend refers to low-value, sometimes one-off purchases that fall outside an organization’s strategic spending. These transactions technically follow procurement guidelines, but are often unplanned, such as ordering catering services for unexpected team events or repairing broken office equipment. Thus, tail spend management is difficult, even for smaller organizations, due to each purchase's small, infrequent, and compliant nature.
Maverick spend, on the other hand, involves purchases made outside approved procurement processes, regardless of the amount spent. It’s defined by non-compliance, such as using unapproved vendors or skipping approval workflows. While this makes maverick spending easier to identify, it also poses far greater financial risks.
How to Manage Maverick Buying
Controlling maverick spend requires a combination of process improvements, policy enforcement, and technology:
- Simplify the procurement process: Reduce friction by making approved purchasing faster and more convenient than bypassing it.
- Implement spend management software: Use technology to track purchases in real time, enforce compliance, and centralize vendor data.
- Train employees regularly: Provide ongoing education on tools, procedures, and the value of using approved suppliers.
- Automate approval workflows: Speed up reviews and approvals to prevent delays that lead to off-policy purchases.
- Increase spend visibility: Use dashboards and reporting tools to monitor activity, detect risks, and guide corrective actions.
