Every business suffers from revenue leakage. You may suffer from creeping business expenses, cash flow delays, earnings delays, revenue barriers, and other issues that cost your business money. Improper billing is a common cause of revenue leakage. You may be under-billing, billing late, or making billing errors without a reliable billing system. Minimizing revenue leakage should be the goal of every business, but stopping the steady drip of lost revenue is more challenging than it sounds.

Understanding Revenue Leakage

There is no real mystery to revenue leakage. Revenue leakage is just what it sounds like – the unintended and unnoticed loss of money. Revenue leakage is money earned but hasn’t been collected and likely won’t be collected because the loss goes unnoticed. The most common source of revenue leakage is small gaps in billing that result in customer underpayment.

According to a survey by The Boston Group, 45% of companies see revenue leakage as a chronic problem, and 73% lack automated processes to address revenue leakage. Organizations lose anywhere from 1% to 5% of EBITA from flawed or inaccurate business processes that cause revenue leakage. It doesn’t seem like much, but if your company generates $100 million in annual revenue, you are losing $5 million to revenue leakage, losses that can be prevented.

Sources of Revenue Leakage

Many issues can result in revenue leakage. Improper billing is only one. You also lose revenue from declined payments, unintentionally canceled accounts, improper application of discounts, duplicating or extending free trial periods, charging expired credit cards, and other errors. Manually tracking accounts and managing recurring billing is a huge problem that leaves you open to human error.

The bottom line is your current billing solution needs to be revised.

The more complex your business model, the more opportunities there are for revenue leakage. Combining single-unit sales with subscription offerings and consumption-based billing creates more opportunities for errors. As customer volume increases, issuing invoices and tracking payments becomes more complex. Even if your old billing system performed flawlessly, it might buckle as the billing volume increases with growing demand.

Perhaps your legacy billing system may not integrate with other business systems. Or the billing system wasn't designed to handle subscription billing. Using manual processes such as spreadsheets will only add delays and errors. Without the proper automated billing solution in place, you will start to see mistakes or, more likely, overlook sources of revenue leakage.

Rather than trying to plug the leaks using an outdated billing system, it may be time to adopt a new intelligent billing solution.

What to Look for in Revenue Leak Prevention

Adopting an agile billing solution to handle complex business models, including recurring revenue models, can stop revenue leakage. Using the right billing platform to handle complex billing terms, high transaction volumes, and regular changes ensures you aren’t leaving money on the table.

Here are just of view of the features to look for in a billing solution that can help you stop revenue leakage:

  • Automated billing – Adopting automated billing processes eliminates sources of human error. An automated, agile billing platform minimizes the risk of errors, no matter how complex the billing or quote-to-cash process is.
  • Mediation engine – A powerful mediation engine can normalize data from multiple sources. You must be able to successfully convert various types of data to generate accurate, easy-to-read invoices. Choosing a powerful mediation engine makes the job simple.
  • Integration with other business processes – Billing is just one of the processes required for your business to run smoothly. Your billing system should be able to share data with other business-critical systems like CRM and ERP. Having a single reliable data source for information about products, services, customers, and contracts reduces the chances of revenue leakage. It would be best if you had seamless integration to create a leakproof business system.
  • Flexibility and adaptability – Agile billing requires having the ability to change billing requirements as needed. Updating billing models, pricing, product catalogs, terms, and other parameters should be simple. You must have the ability to support business changes without losing revenue.
  • Transparency – One of the most significant sources of revenue leakage is a lack of visibility. If you can’t see what is happening inside your billing systems, you can’t identify sources of leakage. Transparency is essential to spot bugs and errors that result in lost revenue and frustrated customers. Your billing solution should have near real-time reporting so the finance team can ensure everything runs smoothly.

Worrying about revenue leakage should be low on your list of business concerns. With the right automated billing system, you can minimize the time and effort required to manage complex billing models at scale and concentrate on other requirements to build your business. Automating billing and integrating key business processes makes it easy to capitalize on change to build revenue without concern about revenue leakage.

We invite you to take a virtual tour of our platform today to see how Gotransverse helps customers improve billing workflows and reduce revenue leakage. Feel free to request a demo to talk with one of our billing experts to see if Gotransverse is the right billing platform for your organization.

This post is part of a new blog series, "Is your billing system the best it can be?" to address the importance of controlling costs by integrating a strategic finance process.