UK businesses are losing a staggering £244 billion in revenue per year, placing a tremendous amount of jobs at risk. According to research conducted by independent UK consultancy Sagacity, companies across sectors including energy, telco, insurance and retail are falling short in collecting, on average, 5.87% of the revenue they are owed each year.
The study revealed that two-thirds of senior professionals who have oversight of profit and loss admitted that failure to control revenue leakage could result in job losses.
An alarming finding that surfaced from the research is that these companies, operating in sectors such as telcos, utilities and insurance, are implementing promotional offers and discounts for customers who are no longer eligible for them.
Free services from entertainment providers like Disney+, Apple Music, and Netflix or extended free trials that should have ended are inadvertently being extended. Furthermore, firms acknowledged not billing some of their customers as a result of poor data reconciliation, hampering their ability to match customers with the services they receive.
Coming in at an astonishing loss of £244 billion annually, the revenue leakage is indeed creating immense problems for businesses, putting profitability and growth potential in jeopardy.
According to the report, 74% of companies confirm they are aware of this revenue leakage but are at a loss on how to prevent it. About 70% say the leakage is negatively impacting their profitability and hindering growth. Additionally, two-thirds acknowledge that without getting this revenue leakage under control, the threat of redundancies is inevitable.
The "Missing Billions: The Impact of Revenue Leakage on UK Business" report surveyed 200 professionals, responsible for profit and loss, across the telco, insurance, energy, and water sectors. Nearly half (45%) of revenue loss comes from data errors, control failures and inadequate oversight.
This includes £37.3 billion revenue loss caused by human error, such as manual data entry into multiple systems, while lack of oversight, poor processes, governance and controls cost £24.9 billion. Further losses of £24.9 billion were due to inaccurate or incomplete data impacting billing, and an equal amount was attributed to poor data reconciliation.
Speaking on the issue, Anita Dougall, CEO of Sagacity, stated, "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.”
Dougall emphasises the importance of businesses adopting a holistic approach to pinpoint where and how the revenue leakage occurs. But according to the research, 70% of businesses compare revenue leakage to 'death by a thousand cuts', pointing out that several processes are prone to causing leakage.
Internally, the roles often blamed include internal sales (46%), marketing and events (38%), billing (38%), the IT department (38%), and customer service (28%). However, external entities such as third-party brokers, blamed by more than a third (36%), are also seen as contributors to the issue.
Lost revenue can often be traced back to problems with data quality. An overwhelming percentage of businesses (77%) recognise poor quality data as a major source of revenue leakage, with 74% stating it prevents the collection of earned income.
This issue is particularly perturbing as 76% of businesses admit to not even sending a bill to some customers due to poor data reconciliation. Further, 72% lose money by offering discounts to people who are no longer eligible, due to a lack of timely data, and 74% remark that poor quality data amplifies their operating costs.
Dougall concludes, "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. 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."