Research from technology-enabled data consultancy Sagacity shows businesses are leaking billions of pounds in revenue each year and don’t know how to prevent it – putting jobs at risk.
On average, UK businesses estimate that 5.87% of revenues remain uncollected each year – equating to £244 billion annual losses.
74% of businesses are aware revenue leakage is a problem, but do not know how to prevent it and 70% say revenue leakage is hurting profitability and hampering growth.
Two-thirds say that if they don’t get revenue leakage under control, people may lose their jobs.
For its Missing Billions: The Impact of Revenue Leakage on UK Business report, Sagacity surveyed 200 professionals with responsibility for profit and loss[2] working in telco, insurance, energy and water.
Almost half (45%) of the revenue loss comes from errors with data, controls and oversight, including £37.3 billion revenue loss caused by human error, such as manual data entry into multiple systems.
Lack of oversight, poor processes, governance and controls cost £24.9 billion and businesses also lost £24.9 billion due to inaccurate or incomplete data impacting billing.
Another £24.9 billion was caused by poor data reconciliation or multiple versions of the truth.
“The amount of money being left on the table is shocking but perhaps equally worrying is that many businesses have their heads in the sand, with two thirds saying that revenue leakage is unavoidable, and the less said about it, the better. While many of the problems uncovered are not due to a simple lack of effort, businesses can take effective action to stem the tide,” said Anita Dougall, CEO of Sagacity.
“Businesses need a holistic approach to understand exactly how and where revenue leakage is happening, but this is easier said than done.”
The research underlines how difficult it is to pin down one main cause for this costly revenue leakage, with 70% saying revenue leakage is like ‘death by a thousand cuts’.
Internally, the finger of blame points towards internal sales (46%), marketing and events (38%), billing (38%), the IT department (38%) and customer service (28%). Yet external parties also have a part to play, with more than a third (36%) blaming third-party brokers.
Across all these sources, most revenue leakage can be traced back to problems with data. Almost four in five businesses (77%) say poor quality data is a major source of revenue leakage, with 74% saying it prevents them from collecting earned income.
Specifically 76% don’t even send a bill to some customers due to poor data reconciliation (i.e. inability to match customers with the services they receive).
72% lose money by offering discounts to people who are no longer eligible, due to a lack of timely data, whilst 74% say poor quality data increases their operating costs.
“Businesses can feel like they are playing a game of ‘whack a mole’, with revenue leaks seeming to pop up out of nowhere, but it’s not as random as it appears,” added Anita Dougall.
“The first step towards regaining control is to pinpoint processes that cause leakage the most often – for instance, tasks involving manual elements, hand offs, large numbers of customers or time pressures.
“They also need to make data quality an absolute top priority – ensuring it is captured accurately, cleansed and kept up to date. By getting a handle on processes and driving data quality, businesses can start to stem the tide of revenue leakage.”
