Revenue Leakage Audit
Find the revenue you earn but never collect: unbilled work, discounting, scope creep, failed payments, billing lag.
Example scenario—not a forecast or verified benchmark. Enable JavaScript to edit inputs, view charts, save locally and export your analysis.
Example inputs
- Annual billed revenue
- 4,000,000
- Gross margin
- 45
- Work delivered but never invoiced
- 1.5
- Average discount given off list price
- 7
- Discount level you would accept
- 4
- Unpaid scope creep (extra work not priced)
- 1.5
- Failed / declined payments
- 1
- Share of failed payments you recover today
- 50
- Bad debt written off
- 0.75
- Days from work done to invoice sent
- 12
- Cost of capital
- 9
- Share of leakage realistically recoverable
- 50
Example results
You are leaking about $311K a year (7.8% of revenue); excess discounting is the largest source and $155K is realistically recoverable.
- Total annual leakage
- $310,868
- Leakage as % of revenue
- 7.8%
- Recoverable in year one
- $155,434
- Excess discounting
- $129,032
- Unbilled work
- $60,000
- Scope creep
- $60,000
- Bad debt
- $30,000
- Cash tied up by billing lag
- $131,507
What stands out
Leakage equals 7.8% of revenue
$311K a year is earned but not collected. Unlike new sales, recovered leakage carries almost no added cost, so it lands close to 100% in profit.
Excess discounting is the biggest leak: $129K
42% of total leakage. Set a discount approval matrix: reps up to 4%, manager sign-off above, owner sign-off above 8%.
Discounting is 3 points above policy
At a 45% gross margin, every point of discount wipes out about 2.2% of gross profit.
12-day billing lag ties up $132K
Invoicing same-day releases that cash once and saves $12K/year in financing cost.
Recovering 50% adds $155K a year
That is roughly a 9% lift on current gross profit with no new customers.
Next actions
- Excess discounting ($129K): Set a discount approval matrix: reps up to 4%, manager sign-off above, owner sign-off above 8%.
- Unbilled work ($60K): Require a change-order or add-on line on every job ticket before it can be closed; reconcile time/materials to invoices weekly.
- Scope creep ($60K): Write a tight scope of work with explicit exclusions and a priced change-order menu; train crews to log extra requests.
Model assumptions & limitations
- All leakage rates are your estimates. Validate by sampling 20–30 recent jobs or invoices against what was delivered.
- Excess discount is measured against implied list price above your policy level.
- Billing lag leakage is the financing cost of the delay (revenue × lag days/365 × cost of capital), not lost revenue.
- Assumes 50% of leakage is recoverable in year one; this is a planning assumption, not a benchmark.