Revenue leakage. Even if you don’t know what it means, it sounds bad! When is a leak ever good news? A leak tied to revenue? Even worse!
Unfortunately for many service businesses, revenue leakage is real and more common than you may realize. We’re here to discuss exactly what it is, what causes this leakiness and how you can fix the leak and prevent future leakage issues.
What is Revenue Leakage?
In the absolute simplest terms, revenue leakage means you’re losing money. You don’t have to be a finance expert to know that this isn’t great.
To put it in more technical terms, revenue leakage is the loss of revenue for your organization. This is usually unintended, often unnoticed, and isn’t always due to external causes. In fact, most often, revenue leakage is a result of underbilling or inaccurate billing for services provided to your clients.
Often, the leaks are small but could ultimately lead to huge losses for the business. Companies suffering from revenue leakage stand to lose between 1 to 5 percent of their earnings unnoticed.
What Causes Revenue Leakage?
So why exactly does revenue leakage happen? Let’s find out.
– Reliance on spreadsheets for time tracking
Spreadsheets are great, but not for everything. If you’re using a spreadsheet to track time within your organization, it could definitely be a source of revenue leakage.
Tracking time within a spreadsheet is usually a tedious, cumbersome process. Plus, you will probably need administrative oversight to ensure time is being entered correctly for all tasks and projects. This leaves a lot of room for error.
Once time is entered on the spreadsheet, it will then also need to be imported into billing software to generate client invoices. Once again, this leaves room for error… and consequent revenue leaks.
– Not tracking admin time
The average employee spends about 28% of their time reading and responding to emails, yet it’s more than likely your team isn’t tracking the time they spend on emails. Similarly, meetings take up a significant chunk of workdays, but are your employees tracking meeting time?
Tracking this time is important so you can get an overview of where your team’s time is going, ensuring any unbillable time is minimized and reducing the potential for revenue leaks.
– Unclear guidelines on billing
Does your organization have clear guidelines and rules on what can be billed and what can’t? For example, is your team supposed to bill for travel required to deliver services or is it unbillable? Should employees bill for email time? What about meetings?
Unclear guidelines lead to confusion among your team, and you may find that key billable items are often left out of invoices due to this confusion, leading to, you guessed it, revenue leakage.
– Manual processes
Like time tracking, other processes in your organization may be too manual, thus leading to more potential errors. For example, if your billing is a manual process, it increases the risk of data entry errors and other inefficiencies.
Not only is there a risk of error, going from one system to another likely introduces delays in invoices being sent to customers, which in turn causes gaps in cash flow.
5 Ways to Stop Revenue Leakage
Don’t worry! Revenue leakage can be stopped. All the issues we’ve mentioned above can be tackled. Here are five ideas:
1. Automate tedious tasks
Your team should spend their time doing work that matters. Don’t let tedious admin work take up their valuable time. Instead, automate repetitive and tedious tasks with the help of software. This includes but certainly isn’t limited to project planning and scheduling, invoicing, workflow management, financial reporting, and more.
A tool like Mission Control can help weed out work-intensive processes and leave your employees with more time to do more meaningful work instead.
2. Centralize timesheets
No more spreadsheets! Instead, house all your timesheets in a centralized hub by adopting a project management tool. It makes the whole process much more streamlined, doesn’t require heavy admin oversight, and automates reminders to make sure timesheets are never missed.
Mission Control’s timesheets feature can help you manage this. Your team can log time against actions, you can easily review time logs and timesheet data which then feeds into the billing tool. This way you can ensure you’re billing your clients for all time spent on their projects.
3. Establish processes and guidelines
If your team is unclear on what is billable and what isn’t, you increase the possibilities of errors and therefore revenue leaks. Create a centralized knowledge hub with information about processes and guidelines to follow. When your team has easy access to policies regarding what is billable or what rates they should use, the margin for error reduces significantly.
4. Fix billing inaccuracies
Manual timesheets require manual data entry into billing software which often leads to inaccurate data entry. This results in inaccurate manual billing, resulting in a loss of revenue.
Once your timesheets are centralized and automated, make sure the billing process follows. Customer invoices can be automatically sent out based on data collected from the timesheets. No more delays to consolidate data. Send invoices automatically at the close of the months.
5. Optimize renewal processes
Sometimes contract renewals can also be a source of leakage. When the customer defaults on payments due to missing contract renewals, there can be a loss of revenue. Automate contract renewals and related tasks within your project management tool, and you’ll never lose out on revenue due to a missed renewal. It’s also convenient for your customers.
Eliminate Revenue Leakage with Mission Control
Revenue leakage doesn’t have to be an inevitability of doing business. Making the most of your project management software can help you minimize leaks and maximize revenue.
Mission Control gives you access to a number of great features, that can help you reduce revenue leakage and improve project profitability. The tool can help you standardize your operations, create a centralized data hub for all project data, and give you a fantastic overview of your entire project.
With better visibility over your project, you can get a better of where your revenue is leaking and then, take the necessary steps to fix the leak (and prevent future leaks!).
Contact us today to find out how Mission Control can help you stop revenue leakage at your business.