Leaks are never good news, wherever they are coming from. And the same principle applies when we're talking about leakage in billing. Revenue leakage is the slow, unintended, and often unnoticed loss of money due to minor errors or gaps in billing processes that result in customer underpayments (or missed payments).

How Serious Is Revenue Leakage?

Like that tiny drip from your pipes, it can do significant damage in short order. To put some numbers on it, MGI reports that 42 percent of companies experience revenue leakage, and EY suggests that “Every company — regardless of size or sector — should assume a potential leak of 1 to 5 percent realized EBITDA.” Given that rule of thumb, a 100 million-dollar company can expect to see leakage of 5 million dollars per year, and for a billion-dollar company, that’s 50 million dollars per year.

Where Does Revenue Leakage Come From?

Before we look at how to stop revenue leakage, it’s important to understand the source, and there are several possibilities.

Revenue leakage could come from an inability to bill for all your offerings, unintentional suspensions of accounts based on collection and dunning errors, accidental overapplication of discounts or duplication of free trial periods, charging expired credit cards, flawed usage rating processes, from any of countless potential errors in manual tracking of recurring billing…the list goes on. Revenue leaks can spring from any number of gaps in the billing process, but they all come down to one thing:

The business' billing solution needs to be updated to the task.

You may be working with a homegrown platform or a legacy system that perfectly met all the company needs in the early days but is struggling under growing volumes and more complex business models. Maybe your system doesn't "play" well with your CRM, ERP, or other platforms that drive the business, leading to siloed processes and workflow gaps or redundancies. It may require manual interventions and spreadsheet-based processes that inevitably lead to delays, errors, and wasted time (no matter how talented the finance team members may be). Whatever the logjams, your outdated system will ultimately enable errors that lead to revenue leakage. And it will only get worse the longer you limp along with what you’ve got.

Plugging the Gaps: How to Stop Revenue Leakage

The good news is that revenue leakage is preventable despite how frequently it happens. By implementing an agile monetization system to handle complex business models, high volumes, and constant change, businesses can plug those gaps and stop leaving money on the table.

Here are five ways the right billing platform can stop revenue leakage:

1. Automating Workflows & Processes: By removing human intervention from the equation, an agile monetization system can minimize errors in even the most complex pieces of the quote-to-cash process.
2. Systems Integration: The billing platform is just a part of the network that makes the business run smoothly. If it doesn’t integrate with the other platforms that store and process product, service, and customer data, then revenue slips through those gaps. A platform that integrates seamlessly with others creates a “leakproof” system.
3. Flexibility & Ease of Configuration: Updating billing models, pricing, product catalogs, invoice processes, or anything else in your legacy billing systems requires a good amount of handholding (and often a team of third-party experts). But agile billing systems are easy to configure and reconfigure (and reconfigure again) in-house, simplifying ongoing changes and preventing missed revenue opportunities.
4. Powerful, Accurate Mediation: Usage-based billing involves many sources and varieties of data, so it's critical to normalize and convert it into accurate, easy-to-read invoices to ensure you’re billing for everything customers have consumed. A powerful mediation engine makes it easy.
5. Crystal Clear Transparency: Finally, one of the biggest causes of revenue leakage—or any other billing issue—is the inability of key players to see what's happening behind the scenes. Without that transparency, bugs that could have been easily caught and fixed snowball into problems that lead to serious revenue leakage (and frustrated customers). But the right billing platform provides heightened transparency and real-time billing data to give finance team members the insight they need to ensure everything’s running smoothly at any given moment.

Ready to Stop Revenue Leakage at the Source?

The right billing system empowers growing businesses to minimize their time and resources wrangling complex transactions and high usage volumes. By automating key processes with a system that integrates smoothly with other company technology platforms and encourages change, companies can minimize revenue leakage and drive exponential growth. The Gotransverse platform was designed with these growing businesses in mind. We pride ourselves on giving our clients complete confidence in billing accuracy and timeliness to account for every penny earned. We invite you to take a virtual tour of our platform today to learn more. Then, when you're ready, request a demo to talk with one of our experts about whether Gotransverse is the right billing platform for your organization.

Gotransverse’s "Don't Worry, Bill Happy" series is a "back to basics" look at foundational components of modern billing systems and processes and how the Gotransverse platform makes even the most complex billing needs easy.