Revenue leakage

Revenue leakage: money you earned and never collected

Revenue leakage is money a business has already earned and not collected: a service delivered and never billed, an indexation clause never applied, a contract that ended while the service went on. That money has no record, so no report shows it. The only way to find it is to compare what should have happened with what did.

Where does the money go?

These are the places that recur in almost every business that sells a service, a contract or a subscription:

  • A deal never billed. Recorded in sales or operations, the service delivered, and no invoice created for it.
  • Indexation never applied. An agreement with an index clause or an annual increase that was never put into effect. Very common, and it adds up to large sums quietly.
  • A contract that ended while the service goes on. Whoever delivers the service does not know the contract ended, and whoever bills does not know the service continues.
  • A price that does not match the agreement. The invoiced price came from the price list, not from that customer's specific agreement.
  • A discount above authority, and the discount that creeps. Not only a one-off discount beyond the approver's authority, but one that rises gradually for the same customer over a year. No single event looks unusual.

Why does revenue leakage not show up in any report?

Reports summarise what happened. Revenue leakage is what did not happen: an invoice never issued, a price update never made. A transaction that happened has a record, and it can be sampled and checked. Something not done has no record at all, so there is nothing to sample.

That is also why internal audit and the accountant rarely catch it. They check a sample of what was recorded, after the fact, department by department. The leakage was never recorded, and it sits between two departments.

The seam where it happens: sales and operations against billing

Whoever closes the deal and whoever delivers the service are not whoever issues the invoice. Sales closed a deal on special terms, and billing works from what the system shows. Operations keeps delivering a service, and finance does not know it is being delivered. Each side assumes in good faith that the other is handling it.

This is one case of a wider problem: the expensive failures in an organisation sit in the seam between departments, and a seam has no owner. The full picture, including payments, access rights and investments, is on the page Continuous controls in the organisation.

How do you find revenue leakage?

Reverse the direction. Instead of looking for a mistake in what was recorded, check what should have happened and compare it with what did. The gap is the finding. Some examples of that cross-check:

  • Every deal closed or service delivered, against the invoice issued for it.
  • Every agreement with an indexation clause or annual increase, against the price actually billed after the due date.
  • Every contract that ended, against a service still being delivered to the customer.
  • Every invoice, against the price and discount agreed with that customer.

The cross-check runs on every deal and every day, not on a sample at year end. We start with one cross-check and run it first on your historical data. The result shows how many cases it would have found in the last year, which also shows whether it is worth the investment.

When customers live in a CRM and invoices come out of another system, part of the leakage is born in the connection itself. What crosses between the systems and what stays manual is set out on the page CRM to invoicing sync.

What do we not say?

We publish no leakage percentage, and we promise to recover no amount. Any general figure would be a guess about your business. Your figure comes from your data.

A cross-check checks only what it is given access to. If the agreements are not stored somewhere they can be read from, the cross-check that depends on them will not be built, and that is said at the measuring stage, not after. The decision to bill a customer, contact them or let it go stays with a person.

Where do you start?

With the case that has already happened to you. If you once found a contract never updated or a service never billed, that is the first cross-check. If nothing has happened yet, we start with the source that holds the most deals or contracts. The repetitive work around it, such as the monthly report and reconciliations, is set out on the page Finance automation.

Frequently asked questions

What is revenue leakage?

Revenue leakage is money a business earned and did not collect: a service delivered and never billed, an indexation clause never applied, a contract that ended while the service went on. It comes not from a wrong transaction but from one that never happened, which is why no report shows it.

What are the common causes of revenue leakage?

A deal recorded in sales or operations with no invoice created for it, an indexation or annual increase not applied on time, a contract that ended while the service continues unbilled, an invoiced price that does not match that customer's agreement, and a discount above authority or one that creeps up over a year.

Why does internal audit or the accountant not catch it?

Audit checks a sample of transactions that happened. An invoice never issued or an indexation never applied has no record, so there is nothing to sample. And audit is organised by department, while the leakage sits in the seam between sales or operations and billing.

How much is it at our company?

We publish no percentage, because any general figure would be a guess about your business. The answer comes from your own data: run the cross-check on the last year and see how many cases it would have found, and for what amount.

Does this replace the finance team or whoever owns billing?

No. The cross-check finds the gap and presents it with its context: which deal, which agreement, what should have happened and what did. The decision to bill, to contact the customer or to let it go stays with a person.

Where do you start?

With the case that has already happened to you, if one has: a contract you found was never updated, or a service that turned out never to have been billed. If nothing has happened yet, start with the source that holds the most deals or contracts, and run one cross-check on its historical data.

This page is general information about how we work. It is not an offer, an undertaking, or a promise of any result. Binding arrangements, including the scope of the service and the handling of data, are set out in a written agreement. See the Terms of use.