by Damian Hubbard

A holistic approach that leverages technology and data can help inform operational changes necessary to combat revenue leakage. 

Did you know: a company with revenue of $500 million is likely leaking between $15 million and $25 million every year?

As financial services companies grow, many struggle to ensure their business processes can keep pace. Even the best run companies are leaving money on the table as they tread water in this sea of change, with an average of 3% - 5% of a company’s revenue being lost annually due to errors and process gaps. Reasons for these challenges include a reliance on home grown tools that leaves companies endlessly trying to catch up with fintech; companies deploying their developers to less vital, albeit important areas; and pressure to cut costs, which is driving workforces to do more with less, leading to greater probability of errors. Additionally, there is increasing pressure on financial services companies as margins get squeezed and regulators tighten their grip, resulting in increased risk points. 

Revenue leakage is a problem, but so is overbilling. Even the best-intentioned firms are leaving revenue unclaimed or have underlying operational practices causing customers to be overbilled, which becomes a reputational or even regulatory issue.

How do you ensure your processes can keep pace with rapid change, and your customers are being shepherded with the right level of care through onboarding, properly assessed for new products and changing contractual terms, and billed accurately?

Improve the data capabilities of your company

First, harness the power of your data to identify the areas of revenue loss and the departments affecting them. Digitize contractual data and compare against actual invoicing data. Form real-time compliance monitoring to ensure terms match contracts, preventing rogue agents from padding invoices.

Technology provides the backbone for more efficient future processes and accurate insights. Powerful, friendly-to-use tools exist in the marketplace that can transform the way your company utilizes its data.  Employing the correct data strategy (teams, pods, Agile, waterfall, etc.) and technology stack can allow you to access and use previously locked up data.

Contracts hold some of the most critical data for companies and are often filed away with only a few handpicked data elements extracted for a specific use or two. Digitizing your contracts and extracting that information unlocks a wealth of data that can be put against your other internal data (e.g., billing, CRM) and displayed in customized views for specific teams.

Applying this type of technology highlights areas of weakness and allows your organization to monitor improvement and stability over time. Understanding where the 3% - 5% of revenue leakage exists allows your organization to take a pointed look at existing organizational structures, processes, procedures, and technology.

Set the Lines of Defense (LOD) up for success

Margin squeeze, increased sales targets, and reduced budgets and operational spend is putting increasing pressure on all three LODs. Errors or oversights are bound to come up under the heightened pressure, and it is imperative all three LODs are set up to succeed.

The Three LOD model is a governance system that works across the business, risk and compliance, and internal audit and includes:

  • First LOD – the business functions that own and manage risks.
  • Second LOD – functions that oversee or specialize in compliance or the management of risk.
  • Third LOD – functions that provide independent assurance (e.g., internal audit).

Although this framework has been around since the break of the financial crisis, it can still be improved by assessing the organizational structure and operations:

  • Roles and responsibilities.
  • Activities and processes.
  • Data and business intelligence.

Make operational and process changes – with an eye toward the future

Implement operational and process changes that address the problem at hand and enable your technology, with an eye on the future. Streamline onboarding teams and processes to be more connected to the front end of the deal, resulting in better contractual understanding and fewer errors. 

Become a resilient organization by breaking away from outdated trends – don’t jump to outsourcing. Taking a holistic approach, including property strategy, industry trends, and onshoring, could provide a better long-term return.

Viewing your company’s organizational structure and operations not just in today’s or tomorrow’s terms, but farther into the future as your business evolves with changing workplaces, workforces, competitive landscapes, etc., will set you apart from your competitors and ensure you are closing the spigot on revenue leakage.

Revenue leakage is not just a billing problem or just a contract problem, it is an all-encompassing problem that requires thoughtful planning and action to alleviate. Solving the problem has obvious revenue implications, but also positions your organization to rapidly respond to the increasing margin and regulatory pressure, if not outpace it.