UK businesses are losing out on billions of pounds of revenues owed to them every year, putting jobs at risk, new research suggests.
Firms on average estimate that 5.87 per cent of their revenues remain uncollected each year, according to research compiled by data insights consultancy Sagacity.
In aggregate, the firm says this leakage costs UK companies up to £244billion annually.
Revenue leakage is money that a business earns but does not collect, usually because the company is unaware the cash is owed.
The research also showed that two-thirds of businesses believe that revenue leakage will lead to an increase in job losses.
The research also showed that two-thirds of businesses believe that revenue leakage will lead to an increase in job losses
The report, ‘The Missing Billions: The Impact of Revenue Leakage on UK Business’, found that 74 per cent of businesses are aware revenue leakage is a problem, but do not know how to prevent it.
Sagacity based its calculation of total revenue leakage on a survey of professionals with responsibility for profit and loss within the telecoms, insurance, energy and water sectors.
Telecoms businesses reported an annual leakage of 7.09 per cent which equated to a £2.3billion loss.
Insurance businesses reported an annual leakage of 5.44 per cent while utilities businesses reported a rate of 4.68 per cent, reflecting an aggregate loss of £4.1billion and £3.3billion, respectively.
A further 70 per cent say revenue leakage is hurting profitability and hampering growth.
The report also found that around 45 per cent of the revenue loss is due errors with data, controls and oversight.
This included £37.3billion revenue loss due to human error, such as manual data entry into multiple systems, while £24.9billion is lost because of a lack of oversight, poor processes, governance and controls.
Businesses also lose out out on a further £24.9billion due to inaccurate or incomplete data impacting billing, according to the report.
Another £24.9 billion was caused by poor data reconciliation or multiple versions of the truth.
Anita Dougall, CEO of Sagacity, said: ‘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.
‘Businesses need a holistic approach to understand exactly how and where revenue leakage is happening, but this is easier said than done.’
The research stressed the difficulty in finding the cause of the revenue leakage with 70 per cent describing it as a ‘death by a thousand cuts’.
Almost four in five businesses (77 per cent) believe poor quality data is a major source of revenue leakage, with 74 per cent saying it prevents them from collecting earned income.
Dougall added: ‘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.’
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