Revenue Leakage Defined
Revenue leakage is the unnoticed or unintended loss of revenue from your company. While leaks can come from both the revenue and the expenditure side, most commonly, revenue leakage refers simply to not billing (or under-billing) your customer for products and services provided. How big a problem is it? Statistics surrounding revenue leakage vary, but estimates indicate that most companies stand to lose between 1 and 5 percent of their earnings before they can be realized. For enterprise companies, this type of loss can add up to a significant impact to the bottom line. Here are four ways to prevent revenue leakage.
Eradicate Revenue Errors
If you are using spreadsheets to track your recurring revenue business, you could be leaking revenue and not realize it. Data entry errors in spreadsheets can be associated losses in the billions because of an extra zero, a misplaced decimal, a spreadsheet formula error, or a hidden row of data. More spreadsheets, more duplicate data entry, more opportunity for human error, and the greater the risk of revenue leakage.
Spreadsheets are not the only culprits: pricing errors can also occur when customer contract pricing is not enforced, or when unearned or inappropriate discounts are applied during invoicing. It’s vital to have a system in place that enforces your business rules, and leads to accurate, error-free billings.
Consider a Tiered Pricing Model
Offering your service at different price points can help increase potential revenue. Tiered pricing models are often used in recurring revenue models to help give different options for potential customers, framing the reference for the price points.
Tiered pricing helps your organization bring in more revenue, broadens your potential audience, gives customers a choice, and helps maximize the value of your offering—preventing revenue leakage.
Leverage Usage-Based Billing
Revenue leakage may also occur when you’re not able to efficiently and accurately track and bill for different usage. If you can’t accurately track and bill for consumption-based services, you could be missing out on a significant revenue stream.
Usage-based billing helps ensure you’re correctly charging for your services and never leaving potential revenue on the table.
Maximize Revenue with RecVue
Revenue leakage doesn’t have to be a negative consequence of running your business. Putting in place better data controls can alleviate these issues and eliminate the loss of revenue. RecVue’s unified monetization platform powered by big data gives you control over all aspects of your recurring revenue from innovative pricing models to monitoring and reporting on financial performance.