In the current economic climate, maverick buying is increasingly becoming an issue for large companies. This has major implications for both the financial health and operational efficiency of organizations. In this blog, we first discuss the latest findings and figures from the Digital Transformation Finance and Procurement 2024 Trend Report, and then how companies can deal with them.
What is maverick buying?
Maverick buying refers to purchases made outside established purchasing procedures. This means that these expenditures are not pre-approved or contracts are not in place with suppliers. The result is often a lack of control, higher costs, and extra manual work for finance departments.
But why does maverick buying actually pose a problem? In summary, maverick buying does not involve agreeing to favorable supplier terms, so you pay unnecessarily high prices.
In addition, logically, there is little insight into the expenditure and Finance department does not get the purchase in its sights until an invoice comes in after the purchase. A finance employee then has to work manually to create a separate order for this and book it all in. Thus, a seemingly innocent purchase soon causes a lot of wasted time and money.
The consequences in a row:
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Lack of control: Without standardized processes, there is less insight into spending, making it difficult to manage budgets and make financial projections.
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Increased costs: Because purchases are made outside of contracts, companies often miss the opportunity to take advantage of volume discounts and favorable terms.
Additional manual work: Invoices for non-contracted expenses must be entered and processed manually, leading to inefficiencies and increased workload for finance departments.
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Notable figures from the 2024 Trend Report
The Digital Transformation Finance and Procurement 2024 Trend Report shows the following:
- Indirect expenditures: Among large companies, 34% of total expenses are indirect costs. This percentage is slightly lower among medium-sized companies, at 28%.
- Management of indirect expenditures: Large companies on average control 59% of indirect expenditures, compared with only 40% for medium-sized companies.
- Maverick buying: More than half (54%) of finance professionals at large companies experience maverick buying as a problem. At mid-sized companies, the percentage is 44%. Buyers are less likely to see this problem; only 33% of buyers at large companies and 29% at midsize companies share this view.
Solutions for maverick buying
Maverick buying can have significant negative consequences for an organization. Fortunately, there are several strategies to address this problem and improve efficiency and control within purchasing processes.
Stricter procurement procedures
Establishing and enforcing clear purchasing guidelines is essential to reduce unauthorized purchases. This includes defining approval levels, establishing a list of approved suppliers and enforcing compliance with these guidelines. Through audits and regular monitoring, companies can ensure compliance with these procedures.
Training and awareness
An employee who is aware of the consequences of maverick buying is an employee who can follow the rules. Thus, sufficient training can ensure that employees actually understand the importance of compliance with purchasing procedures and therefore can properly comply.
Regular training and workshops help educate employees about the risks and benefits of procurement management.
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Awareness: Regular communication campaigns help raise awareness and promote compliance with procurement guidelines.
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Workshops and training: Through hands-on workshops and training, employees better understand how to follow established procedures and why this is important.
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Feedback: Implementing feedback mechanisms where employees can share problems or suggestions helps in continuous improvement of procurement processes.
Conclusion
Maverick buying remains a challenge for large companies, but with the right strategies and technologies, the impact can be dramatically minimized. Through better controls and better automation, companies can not only cut costs, but also increase efficiency and improve overall financial health.
Getting started with maverick buying reduction
Want to get started on reducing maverick buying? Let ICreative help you with effective spend management.
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