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What is maverick buying and what are the risks?

A spot of maverick buying may seem harmless, but the costs and complications involved soon add up, putting your business at risk. Find out what maverick buying is all about, why it happens, and how it could impact your business.

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What is maverick buying?

Maverick buying (sometimes called invisible, wild or rogue buying) is the inefficient purchasing of low value, low volume, tail-end goods and services. These essential but often overlooked items required by a company – like coffee and biscuits, copy paper, or a new laminator – and everything you run to the store for.

It also includes paying for services, such as fixing broken facilities, and more substantial spending on IT equipment, construction machinery hire, or emergency maintenance of production lines. 

Importantly, maverick buying takes place outside existing supplier framework agreements. And because maverick buying is usually carried out by individuals, procurement teams remain unaware of these transactions. 

It’s also worth acknowledging that if it left unchecked, maverick buying can result in financial losses and less-compliant purchasing.

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Maverick buying can impact your business by higher process costs and other risks.

So why does maverick buying happen? 

In our personal lives, we’re all used to getting what we want, when we want it. That ‘need’ for something ‘now’ is a strong motivation for maverick buying in businesses too.

For them, maverick buying is a way to secure faster delivery times, control their individual procurement needs and, in some cases, support their local business community. But what other factors contribute to driving maverick buying on a company-wide scale? Let’s take a look…

Lack of a top-down compliance culture

It all starts at the top. If your organisation’s leadership doesn’t encourage and insist on compliance with group-wide procurement processes, how can you expect everyone else to fall in line? 

Your central procurement team will be powerless to enforce buying behaviours, meaning you’ll miss out on contract terms and negotiated prices. And without any incentive to follow the rules or oversight, your decentralised purchasing departments will do as they please.

Lack of standardised group-wide processes

Leadership aside, if you don’t have any standardised group-wide processes in the first place – or a seamless procurement system that works for everyone – teams will make up their own processes, use the solutions they prefer and resort to maverick buying.

Unfamiliar or confusing procurement processes

Employees, particularly in regional or specialised departments, are put off by long-winded centralised procurement processes for what they see as strategically trivial spending on things they really need. Instead, they’ll take the path of least resistance.

Catalogues don’t meet buyers’ needs

In some cases, maverick buying happens when the approved supplier catalogues available are limited, failing to offer the selection of products your buyers’ are looking for.

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What are the risks to my business from maverick buying?

While employees may favour maverick buying, its lack of transparency and accountability presents serious fiduciary and compliance risks for your business. The following are key threats:

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Accounting errors

Placing ad hoc orders with new, unvetted suppliers can lead to numerous payment and reconciliation issues. Not least because transferring order and supplier details to your central accounting system might require manual data entry, which is notoriously slow and error prone.

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Poor business intelligence

Without knowing the ‘who, what, why, where, when and how’ of spending across your business, you’re leaving your Chief Procurement Officer, and others responsible for managing budgets, with large gaps in their knowledge. That in turn reduces their ability to conduct effective indirect tail-spend analysis and set realistic KPIs.

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Lack of cash flow transparency

Maverick buying causes delays, errors and omissions in financial reporting, because if you can’t see it, you can’t measure or control it. This lack of timely insights raises the risk of unexpected cash flow problems.

High process costs

Typically, procurement teams are responsible for making cost savings through strategic purchasing, but maverick buying puts those targets in jeopardy. It also reduces the department’s efficiency and creates more work for accounting, driving up administrative costs. Company-wide processes can make a big difference, streamlining P2P and indirect procurement operations.

Damage to supplier relationships

Purchases from competitors of preferred suppliers weaken your existing relationships. While the absence of formal contracts with ad hoc suppliers exposes the business to vulnerabilities in product sourcing, delivery times, returns and refunds, and supply chain risks.

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Conflicts with CSR and ESG strategies

Increasingly, investors and regulators expect companies to report on their supply chain resilience (and associated dependency risks), as well environmental issues, as part of CSR and ESG strategies. These include WEEE directive compliance for electrical and electronic equipment, human rights commitments, and carbon emissions reporting. If you don’t know your suppliers, you won’t know if their practices support or undermine your agenda.

Growth of a non-compliant corporate culture

Finally, maverick buying is not just a financial or business risk, it is also a threat to good governance. If your employees think you don’t care about this spending, they won’t care how much they are spending. If they see you are lax in your financial controls, they are likely to be lax in their buying behaviours.

What’s the solution?

Want to avoid the risks by making maverick buying a thing of the past? Unite with its Mercateo Marketplace is here to help. Learn how we can support your procurement needs today.

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Put a stop to maverick buying

Check out part two of our maverick buying blog series: Simple solutions that put a stop to maverick buying. In this article we explain how you can identify pinpoint instances of maverick buying and outline the steps you can take to effectively prevent it.