Lakshmi Raj, Co-Founder and Co-CEO of replicona time reconnaissance company.
Recently, the world’s leading financial institution – the World Bank – described the past year as “a year of uncertainty”. Rising global inflation, a focus on protectionism by leading economies and ongoing global conflicts continue to dampen any prospects for an imminent financial recovery. As a result, companies around the world are gearing up for a tumultuous year amid an impending recession.
Faced with such worrying forecasts, companies and executives should focus their energies on plugging revenue losses — and with good reason. The data suggests that an organization’s inability to close such loopholes can significantly affect its financial health. For example, according to an EY estimate, companies lose 1% to 5% of EBITA (earnings before interest, taxes and amortization) due to inadequate contract management and payment tracking processes. Additionally, an estimated 42% of businesses are experiencing some form of lost revenue.
Set up a spending pecking order.
Companies spend millions of dollars training their sales teams to offer products and services better than their competitors. Employee upskilling and reskilling programs, engagement, wellbeing and retention are equally important. Then there are sales, marketing, digitization and digitization initiatives that require significant and sustained investments. So companies have no shortage of space to spend money on and boost their reputation. As such, establishing a pecking order of areas to spend on is a challenge. Still, addressing revenue leakage should be one of the organization’s critical priorities as revenue streams become more and more gapped, often because there is no single source of truth.
Understand the source of leaks.
The potential for lost revenue is everywhere – gaps in employee time tracking and manual data entry are common reasons. And these problems affect companies of all sizes. However, bypassing the ongoing debate between “new-age” and “traditional” companies reveals that human error typically results in lost revenue, which rarely occurs in large numbers. Instead, small and often inconsequential but persistent errors such as lost productivity in man-hours typically accumulate to a significant number over time, resulting in significant losses.
Automation and AI can empower organizations to identify gaps and fix them.
Various industry insights underscore the enormous challenge that inefficient time tracking poses. For example, one report suggests US companies lose between $20 billion and $50 billion annually to employee theft, and organizations worldwide lose over $400 billion in lost productivity. Here, companies can benefit from optimized use of resources and minimized sales losses by automating certain processes. For example, doing away with traditional timesheets by letting artificial intelligence do the heavy lifting will empower hybrid and remote workforces. They can use AI-powered time tracking tools to automatically capture their work and time data across locations, calendars, and apps like Microsoft, Google, Zoom, Jira, Slack, Asana, and Adobe.
Automating manual processes can help companies increase employee efficiency and productivity — which directly impacts revenue.
Build a system that works.
Lost revenue is undoubtedly a nagging problem for businesses of all sizes. However, you can overcome the challenge with a combination of proven processes. Let’s discuss them briefly.
Audit frequently.
A revenue leak audit helps companies identify the main sources of the leak, but no process is ever completely foolproof. Therefore, no matter how watertight the strategies used to avoid losing revenue, companies should continuously and separately examine and analyze business processes to proactively identify and eliminate leaks.
Automate systems for real-time visibility and insight.
Centralizing and automating processes is a great way to close ongoing leaks and enable real-time monitoring, approvals, and tracking. In addition, automation provides real-time visibility and insight into data such as cash flows and resource utilization, helping to pinpoint unusual transactions and manage staff bandwidth to optimize resource utilization.
validate data.
Manual data validation is a tedious and error-prone process. Businesses should consider multiple layers of checks and balances to validate data across different systems to ensure compliance. Several tools have a built-in feature that helps notify the affected team or department of errors. This mechanism allows teams to fix bugs before they manifest themselves into larger problems.
In 2023, an opportunity awaits.
Laozi, a 5th-century BC Chinese philosopher. B.C., is said to have said, “Difficult problems should be solved while they are still small.” Although he advised the rulers of the Zhou Dynasty, the principle of nipping the problem in the bud still applies to business two and a half millennia later. To give current business context, a company that generates $10 million in revenue and has a 3% leak will lose $300,000 in revenue. This may seem like simple math, but the opportunity cost is huge considering the median wage in the US is $58,000. So companies can spend the sums they lose due to accounting and other human errors hiring five people to track down lost revenue. More pragmatically, however, companies should consider spending it on adopting new systems that reduce error rates and minimize the chances of human error.
The year of uncertainty gives way to the year of great exodus. 2023 promises to be a challenging time for companies across the board. But it also presents a fantastic opportunity to streamline processes and create a watertight ecosystem for revenue management.
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