How procurement automation reduces maverick spending

Uncontrolled purchasing continues to weaken financial discipline in many organizations, despite clearly defined procurement policies and negotiated supplier contracts. Industry research consistently shows that low contract compliance reduces the ability to fully realize negotiated savings. According to procurement benchmarking studies by The Hackett Group, organizations with higher spend under management significantly outperform peers in cost savings and operational efficiency. This highlights how unmanaged purchasing directly affects financial performance.

When transactions bypass structured workflows, organizations lose visibility into real-time spend, reduce supplier leverage, and increase audit and compliance risks. Over time, these fragmented purchases accumulate into measurable cost leakage and governance gaps.

To address this structural challenge, businesses are increasingly investing in procurement automation. By embedding approval workflows, budget controls, contract enforcement, and spend analytics into a centralized system, organizations can strengthen compliance while improving efficiency and transparency.

What is maverick spending in procurement?

Maverick spending in procurement refers to purchases made outside an organization’s established purchasing policies, approved supplier lists, negotiated contracts, or formal approval workflows. It occurs when employees or departments bypass the defined procurement process and independently select vendors or make purchases without following required controls. Maverick spending in procurement, it is not necessarily fraudulent behavior. In most cases, it happens due to urgency, lack of awareness of existing contracts, system limitations, or decentralized decision-making

Why does it happen in growing organizations?

As organizations scale, purchasing behavior becomes more complex. Growth introduces structural, operational, and cultural changes that can unintentionally increase off-process buying. In many cases, the issue is not weak policy; it is governance that has not evolved at the same pace as the business.

1. Growth outpaces process maturity

Early-stage or fast-scaling companies often prioritize revenue, expansion, and operational agility over structured procurement controls. During rapid growth phases, formal purchasing frameworks may still be developing. When transaction volume increases, but processes remain manual or loosely enforced, compliance naturally declines. Procurement teams may struggle to monitor spend across expanding business units.

2. Expansion of business units and locations

As companies open new offices or operate across regions, purchasing authority is often delegated locally. While this supports operational efficiency, it reduces centralized oversight.

Local teams may:

♦ Engage regional suppliers without contract review

♦ Negotiate pricing independently

♦ Bypass headquarters approval due to time zone or communication delays

Without standardized digital controls, decentralized purchasing leads to inconsistent compliance.

3. Increased spend complexity

Growth brings:

♦ New product lines

♦ More service categories

♦ Specialized technical requirements

♦ Project-based procurement needs

Procurement policies that worked for limited categories may not cover new purchasing requirements. When employees believe existing supplier frameworks do not meet their needs, they seek alternatives outside approved channels.

4. Pressure for speed and operational continuity

In high-growth environments, business continuity often takes priority over process adherence. Teams under delivery pressure may perceive procurement steps as bottlenecks, especially if approvals are manual or multi-layered.

When approval cycles are slow:

♦ Departments use corporate cards

♦ Vendors are engaged without contracts

♦ Purchase orders are raised after goods are delivered

Over time, this behavior becomes normalized.

5. Weak spend visibility during scale-up

As transaction volume increases, manual tracking becomes unreliable. Spreadsheets and email approvals cannot provide real-time oversight across multiple cost centers.

Without centralized dashboards:

♦ Procurement cannot identify off-contract purchases quickly

♦ Finance cannot accurately forecast commitments

♦ Leadership lacks full spend transparency

Limited visibility reduces the ability to detect and correct deviations early.

6. Rapid hiring and cultural gaps

Growing organizations frequently onboard new employees. Without structured training on procurement policies and systems, compliance awareness varies across teams.

New hires may:

♦ Not know preferred suppliers exist

♦ Be unaware of approval thresholds

♦ Follow informal team practices instead of policy

Over time, informal purchasing habits spread across departments.

7. Supplier base expansion without governance

As the business grows, vendor onboarding increases. If supplier approval processes are not automated, the vendor base expands without proper evaluation, documentation, or risk assessment.

This creates:

♦ Duplicate suppliers

♦ Inconsistent pricing

♦ Increased compliance exposure

♦ Higher administrative workload

Maverick spending vs Tail spend: Key differences

Maverick spending example in real life

Understanding a practical scenario helps clarify how control gaps develop inside organizations. Below is a realistic maverick spending example that reflects common operational behavior in growing companies.

Example Scenario

Situation:

The marketing department urgently requires a new project management software tool to support a campaign launch. Instead of raising a purchase request and waiting for approval, the team subscribes directly using a corporate credit card.

At the same time:

♦ The organization already has a negotiated enterprise contract with another approved software provider.

♦ The new vendor is not part of the approved supplier list.

♦ No purchase order is created before the subscription begins.

♦ IT and procurement teams are not consulted.

If someone asks, what is an example of a maverick spend, this is a typical case: a purchase made outside established approval workflows, contracted vendors, and policy controls.

Example -2 

To further clarify how policy deviations occur, here is another practical case that reflects common procurement challenges.

Example Scenario

The operations team requires specialized machinery parts for urgent production maintenance. Instead of raising a formal purchase request through the procurement system, the plant manager directly contacts a local supplier who promises faster delivery.

Key deviations in this case:

♦ The supplier is not part of the approved vendor list.

♦ No competitive quotation process is conducted.

♦ No formal contract terms are reviewed.

♦ The purchase order is created after the invoice is received.

This represents another clear maverick spending example, where operational urgency overrides procurement protocol.

How to calculate maverick spend?

Calculating maverick spend is not just about identifying policy violations. It is about quantifying financial leakage, measuring contract compliance, and understanding how much organizational spend is escaping structured procurement control. A well-defined calculation framework allows leadership to assess governance maturity and savings realization.

Below is a detailed and practical approach used by procurement and finance teams.

1. Establish a clear measurement framework

Before calculating, define what qualifies as non-compliant spend within your organization. Different companies may classify it differently depending on policy maturity.

Common classifications include:

♦ Spend with non-approved suppliers

♦ Spend not linked to a valid contract

♦ Invoices without a purchase order (Non-PO spend)

♦ Transactions bypassing approval workflows

♦ Spend exceeding approved budget thresholds

♦ Supplier onboarding without due diligence

Without a standardized definition, reporting will be inconsistent.

2. Collect accurate spend data

Reliable calculation depends on clean and centralized data. Pull data from:

♦ ERP systems

♦ Procurement platforms

♦ Accounts payable systems

♦ Vendor master database

♦ Contract management systems

Data required includes:

♦ Total spend value

♦ Supplier details

♦ Contract references

♦ Purchase order numbers

♦ Department codes

♦ Invoice dates and amounts

Data quality is critical. Duplicate suppliers, inconsistent naming, or missing PO references can distort results.

3. Identify non-compliant transactions

This step requires analytical filtering.

Typical identification methods include:

A. Contract compliance check

Match invoices against contract records.

Any spend not tied to a valid contract is flagged as off-contract.

B. PO compliance check

Identify invoices without a corresponding approved purchase order.

C. Approved supplier validation

Cross-check vendor names against the approved supplier list.

D. Budget authorization check

Review transactions exceeding approval thresholds.

This filtering process isolates transactions that fall outside defined procurement controls.

4. Apply the standard calculation formula

The basic formula remains:

Maverick Spend (%) = (Non-Compliant Spend ÷ Total Organizational Spend) × 100

Example Calculation

Total annual spend: Rs 50 crore

Non-compliant spend identified: Rs 7 crore

Maverick Spend = (7 ÷ 50) × 100 = 14%

This indicates that 14% of total spend is outside approved procurement controls.

5. Conduct category-level analysis

To gain deeper insights, calculate the percentage by:

♦ Department

♦ Cost center

♦ Supplier category

♦ Region

♦ Business unit

For example:

This breakdown highlights high-risk areas requiring intervention.

6. Measure spend under management (SUM)

Another critical indicator is Spend Under Management.

SUM = (Spend managed through approved procurement processes ÷ Total Spend) × 100

If SUM is low, the organization likely has high maverick behavior

High-performing procurement organizations typically maintain:

♦ 80% to 95% spend under management

♦ Strong PO compliance ratios

♦ High contract utilization rates

Let’s take a practical example to clearly understand how Spend Under Management (SUM) is calculated and interpreted.

Scenario

A company’s total annual organizational spend is:

Rs 100 crore

After analyzing procurement data, the company finds:

♦ Rs 85 crore was processed through approved procurement workflows

♦ These transactions were linked to valid contracts

♦ Purchase orders were raised before invoices

♦ Approved suppliers were used

The remaining Rs 15 crore includes:

♦ Non-PO invoices

♦  Off-contract purchases

♦ Spend with non-approved suppliers

Step 1: Apply the formula

SUM = (Spend managed through approved procurement processes ÷ Total Spend) × 100

So in this case:

SUM = (Rs 85 crore ÷ Rs 100 crore) × 100

SUM = 85%

Step 2: Interpretation

A SUM of 85% means:

♦ 85% of total spend is controlled and compliant

♦ 15% of spend is outside structured procurement governance

♦ There is moderate maverick behavior present

Comparison scenario

Let’s compare with two different organizations:

How procurement automation reduces maverick spending

Below are the key ways automation helps reduce unauthorized and off-contract purchasing.

1. Enforces structured purchase workflows

Procurement automation reduces maverick spending by ensuring that every purchase begins within a procurement software system rather than through informal communication channels. Employees are required to submit a requisition inside the system, which is then routed automatically for approval based on predefined rules such as spend limits or department hierarchy. Because no purchase order can be issued without system approval, unauthorized commitments are prevented at the source. This structured workflow eliminates dependency on emails or verbal approvals and significantly improves compliance consistency.

2. Strengthens supplier and contract control

A procurement software system centralizes approved vendor lists and negotiated contract terms within a single controlled environment. When employees initiate purchases, they are guided toward preferred suppliers and contracted pricing embedded in the system. If a non-approved supplier is selected or pricing deviates from agreed terms, the system flags the transaction before it progresses. This reduces off-contract buying and protects negotiated savings across departments.

3. Improves real-time spend visibility

Maverick spending often goes unnoticed because purchasing data is fragmented. A procurement software system consolidates all transaction data into a centralized dashboard, allowing procurement and finance leaders to monitor spending in real time. Department-wise and supplier-wise visibility makes it easier to detect unusual patterns early. This transparency increases accountability and reduces uncontrolled expenditure.

4. Integrates budget validation into the approval process

Budget overruns frequently contribute to non-compliant purchases. Within a procurement software system, budget checks are embedded directly into the approval workflow. Before authorization is granted, the system verifies whether sufficient funds are available. If spending exceeds allocated limits, escalation rules are automatically applied. This prevents reactive buying decisions and strengthens financial governance.

5. Enhances audit readiness and documentation

Manual procurement processes often lack consistent documentation. A procurement software system automatically records every action, including requisitions, approvals, modifications, and purchase orders. This creates a structured digital audit trail that simplifies internal reviews and external audits. Clear documentation reduces compliance risk and strengthens overall governance maturity.

6. Increases spend under management (SUM)

By ensuring that purchases flow exclusively through the procurement software system, a larger proportion of organizational spend becomes visible and controlled. Transactions are aligned with approved workflows and contracts, reducing off-system buying. Over time, this increases purchase order compliance and improves the percentage of total spend managed under formal procurement oversight.

7. Encourages sustainable compliance behavior

When purchasing processes are slow or complicated, employees tend to bypass them. A well-designed procurement software system simplifies buying through guided workflows and faster digital approvals. When the compliance process is efficient and user-friendly, employees are more likely to follow it consistently, leading to long-term reduction in maverick spending.

How to automate procurement to eliminate maverick spending

1. Centralize all purchase requests through a procurement system

Automating the process starts with making sure that all purchases start within a centralized procurement system.When employees submit requisitions through a unified procurement software platform, procurement teams gain full visibility over demand, categories, and supplier selection. This eliminates fragmented buying through emails, spreadsheets, or direct vendor communication. By routing all requests through a structured procurement tool, organizations prevent unauthorized commitments at the source.

2. Configure rule-based approval workflows

Automation allows businesses to embed policy controls directly into the procurement software.

Approval hierarchies can be defined based on department, spend limits, cost centers, or project budgets. The procurement system automatically routes requests to the appropriate approvers, ensuring no transaction progresses without authorization. This removes dependency on manual follow-ups and reduces the risk of policy bypass.

3. Integrate approved suppliers and contract controls

A common cause of maverick spending is limited visibility into negotiated contracts. A modern procurement tool centralizes approved vendor lists and contract terms within the system. When users initiate a request, they are guided toward preferred suppliers and contracted pricing. If a non-approved vendor is selected, the procurement system can trigger exception approval workflows. This protects negotiated savings and strengthens supplier governance.

4. Enforce mandatory purchase orders before payment

To eliminate after-the-fact approvals, organizations must require purchase orders before invoice processing. A structured procurement software environment links requisitions, purchase orders, goods receipts, and invoices through automated matching controls. This ensures that payments are only made against authorized commitments. Such integration reduces invoice discrepancies and improves financial control.

5. Embed real-time budget validation

Procurement automation should include budget checks at the requisition stage. When a request is submitted, the procurement system verifies available budget against predefined limits. If thresholds are exceeded, escalation rules are triggered automatically. This prevents overspending before it occurs and improves budget discipline across departments.

6. Use dashboards for continuous compliance monitoring

Automation does not end with workflow configuration. A data-driven procurement tool provides dashboards that track spend under management, PO compliance rates, supplier concentration, and off-contract transactions. Procurement leaders can quickly identify deviations and correct them before they escalate. Continuous monitoring ensures that compliance improvements are sustained over time.

7. Drive adoption through training and policy alignment

Even the most advanced procurement software requires user adoption to deliver results. Organizations should train employees on how the procurement system simplifies purchasing while protecting budgets. When compliant buying becomes faster and more transparent than informal methods, maverick behavior declines naturally.

Leading procurement software providers supporting automation initiatives

When organizations invest in procurement automation to reduce maverick spending, selecting the right procurement tool or procurement system is critical. Below are several procurement software solutions recognized for supporting automation, compliance, spend control, and structured workflows.

1. TYASuite - Comprehensive procure-to-pay and procurement system

TYASuite is a cloud-based procure-to-pay procurement software solution that automates every step of the purchasing lifecycle, from vendor onboarding and requisition management to purchase orders, goods receipt notes (GRNs), invoice processing, and payment management. The system offers automated workflows, customizable approval rules, vendor portals, real-time spending visibility, and built-in compliance controls, helping organizations reduce manual effort and enforce policy adherence across departments. It also supports multi-location, multi-currency operations and integrates with existing ERPs like SAP, Oracle, NetSuite, Tally, Microsoft Dynamics, and QuickBooks.

2. SAP Ariba - Enterprise procurement and spend management

SAP Ariba Central Procurement provides a centralized procurement platform that unifies requisitioning, purchasing, sourcing, and contract management across an organization. It enables global control and visibility over spend, integration with SAP ERP systems, and structured workflows to enforce compliance and optimize contracts.

3. Coupa - AI-Enabled spend and procurement platform

Coupa’s cloud-based procurement software connects sourcing, procurement, and accounts payable workflows into a unified platform. It offers automated intake for requisitions, AI-driven insights to highlight savings opportunities, supplier onboarding, and real-time spend visibility. Coupa’s automation capabilities help reduce manual tasks and improve compliance while providing analytics to guide strategic sourcing and risk management.

4. Oracle procurement cloud - Integrated source-to-settle solution

Oracle Fusion Cloud Procurement delivers a broad suite of procurement automation capabilities within the Oracle ERP ecosystem. It automates source-to-settle processes, centralizes supplier information through self-service portals, accelerates contract creation, and enables guided purchasing with budget and compliance controls. Its analytics tools help procurement teams gain insights into spend patterns and supplier performance.

5. Zycus intelligent procurement orchestration platform

Zycus offers a procurement orchestration suite that automates workflows across the entire source-to-pay cycle. With its dynamic workflow engine and intelligent exception handling, the platform helps organizations streamline repetitive tasks, improve process consistency, and reduce errors while enhancing visibility into spend and supplier performance.

Why organizations choose TYASuite

Compared with some larger enterprise suites, TYASuite stands out for a few practical reasons:

⇒ Faster Implementation: Organizations can configure workflows quickly without extensive consulting dependencies.

⇒ User-Friendly Experience: Built with usability in mind, reducing training barriers and improving adoption.

⇒ Focused Automation: Strong emphasis on procurement governance and compliance controls specific to reducing maverick spending.

⇒ Flexible Integration: Connects with existing ERP and financial systems without requiring full platform replacement.

Because of these strengths, many mid-sized and scaling enterprises find TYASuite to be a more balanced procurement solution delivering automation and control without unnecessary complexity.

The ROI of eliminating maverick procurement

1. Recovers lost cost savings

Maverick procurement directly erodes negotiated savings because purchases made outside approved contracts often ignore volume discounts and agreed pricing structures. When organizations eliminate off-contract buying, they ensure that negotiated rates are consistently applied across departments. A procurement software system reinforces this control by directing purchases toward contracted suppliers and flagging pricing deviations before approval. Over time, this restores value that would otherwise be lost through fragmented supplier selection and inconsistent pricing. The financial impact becomes measurable in improved contract utilization rates and reduced price variance across similar purchases.

2. Reduces transaction and processing costs

Unauthorized purchases typically result in operational inefficiencies such as invoice mismatches, missing purchase orders, and retroactive approval requests. These issues increase the time required for invoice reconciliation and exception handling within the finance function. By eliminating maverick procurement, organizations streamline the procure-to-pay process and reduce manual intervention. A structured procurement software system aligns requisitions, purchase orders, goods receipts, and invoices within a single workflow, minimizing discrepancies. This lowers the average cost per transaction and frees procurement and finance teams to focus on strategic activities rather than corrective tasks.

3. Improves budget accuracy and financial forecasting

When purchases occur outside formal procurement channels, committed spend remains invisible until invoices are processed. This delays financial visibility and weakens budgetary control. Eliminating maverick procurement ensures that all purchase commitments are recorded at the requisition stage within the procurement software system. Early visibility into pending and approved spend improves budget tracking and forecasting accuracy. Finance leaders gain clearer insight into cash flow requirements, while department heads become more accountable for planned versus actual expenditure. This structured approach reduces unexpected budget overruns and improves financial predictability.

4. Minimizes compliance and audit risk

Maverick procurement increases exposure to compliance violations, especially in regulated industries where approval documentation and supplier due diligence are mandatory. Purchases made outside policy often lack proper authorization records or contractual validation. By eliminating such transactions, organizations strengthen internal control mechanisms and reduce audit findings. A procurement software system maintains a complete digital trail of approvals, supplier selections, and transaction history, providing clear evidence of policy adherence. This structured documentation significantly reduces governance risk and improves readiness for internal or external audits.

5. Enhances supplier relationship stability

Frequent off-contract buying creates inconsistency in supplier engagement and undermines strategic sourcing efforts. When departments purchase independently from different vendors, supplier relationships become fragmented, and leverage decreases. Eliminating maverick procurement consolidates spend through approved suppliers, increasing predictability in demand and strengthening long-term partnerships. Suppliers are more likely to offer favorable commercial terms and service levels when purchasing patterns are stable and contract-driven. Over time, this consistency supports better performance management and improves overall supply reliability.

Conclusion:

Maverick spending poses a significant risk to financial discipline, compliance, and operational efficiency in growing organizations. By leveraging procurement automation, businesses can enforce structured workflows, strengthen supplier and contract controls, and gain real-time visibility into organizational spend. Automated systems reduce off-contract purchases, embed budget and policy compliance, and create audit-ready documentation, ultimately increasing Spend Under Management (SUM) and promoting sustainable procurement behavior. Implementing a robust procurement software solution like TYASuite not only minimizes cost leakage and operational inefficiencies but also improves supplier relationships and ensures long-term financial governance. Organizations that embrace automation transform.