How to Find and Fix Common Issues with Billing Related Revenue Leakage
Revenue leakage is the result of lost invoicing or billing opportunities, such as not billing or under billing a customer; and is defined as the unplanned loss of business-related revenue. This may occur because billable products or services weren’t tracked or reported efficiently—or because a customer wasn’t invoiced per the terms of their agreement.
The problem with missing a billing opportunity is that you may never be able to recover that unbilled revenue. Even if it’s not too late to send an invoice, delayed billing can damage your relationship with customers.
Finding and Fixing Revenue Leakage
- Manual Processes or Lack of Automation
The Issue: If you’re reliant on manual processes, this is the first area you should address, as it creates the greatest opportunity for billing errors.
Changes in customer billing are a frequent occurrence—for example, customers may wish to upgrade, add-on a product or service, or delay their service. So, if you’re tracking these things using manual processes (unintegrated spreadsheets are something we commonly see used by clients prior to transitioning to an automated solution):
- You open the door to human error, missing data, etc.;
- And you risk not being able to store, track and bill correctly for these charges.
The Fix: Regardless of the size of your business, if you want to set yourself up for success and growth you need to find an automated billing solution that will work for your revenue management team—or at the very least look into process refinement.
- Get advice from someone who knows business and finance;
- Product knowledge and someone telling you about their implementation experience should be free.
- It will give you more info to start making decisions and help you decide if they’re a partner you’re happy to work with.
- Deferred Billing and Installment Payments
The Issue: More payment dates equal more opportunities for delayed payments, and require a more extensive management system
Flexible terms appeal to customers that prefer delaying billing or wish to try a product or service before committing to it. It’s great to offer more options for your customers, but if your organization isn’t recouping that revenue in a timely manner it leads to profit loss.
- For installment payments, the risks and rewards of the good or service are not fully transferred at the point of sale.
- For deferred billing, which may include an interest-free period if full payment is made by a certain date, you risk not collecting revenue beyond an initial payment—and incur the added cost of collection efforts (see below).
The Fix: Our recommended solution for this issue is collecting and analyzing relevant payment-related data.
- Benchmarks and trends will help you understand the reasons behind payment declines and lost sales;
- At which point you can make adjustments and repeat analyses to get the results you’re looking for.
- This is great for identifying both localized and broader issues.
- Late Payments and Collections
The Issue: Chasing payment is both frustrating and time-consuming—while businesses with recurring billing models are the most at risk, all businesses face this issue.
Obviously, customers paying you on time is essential to the overall success of your business. Any time that doesn’t occur you immediately start losing time and resources trying to collect that revenue.
- This can impact numerous areas of your business and damage customer relationships if not handled correctly.
The Fix: Proactively track your customers’ invoice aging through reports and send invoices as soon as possible. Keep collection and payment emails simple and to the point.
- Automate these things whenever possible to avoid errors, and send notifications at regular intervals.
- For collections:
- Remind them of the original payment due date
- Notify them if you are retrying the payment method on file
- Be professional and choose your words carefully
- Recap the product or services so they understand what they will be missing if the agreement or order is terminated
Revenue Leakage Support
Revenue leakage can be an issue that’s more widespread than your billing department. If you’re looking for a revenue leakage analysis, want advice on finance, PSA, or service solution; or need to optimize any part of your business—we offer help, reviews, support, and multi-industry expertise to get your organization headed in the right direction.