Business Leakage: Not of the Anal Variety

Business Leakage: What It Is, Why It Sucks, and How to Stop It

Let’s talk leakage, not the “I forgot to shut the cooler lid” kind, but the silent profit killer that lives inside your business.

Revenue leakage happens when money you should be collecting sneaks out the back door, unbilled hours, missed discounts, pricing errors, shady contract terms…You name it.

It’s not sexy, but it’s real and left unchecked, it’ll bleed you dry like a tick on a coonhound.

What Causes Leakage?

According to McKinsey & Co. and NetSuite, common culprits include:

• Billing errors (missed invoices, wrong rates)

• Theft

• Manual data entry mistakes (your cousin types “$1,000” instead of “$10,000”)

• Uncollected receivables (yeah, that customer still owes you)

• Scope creep (doing extra work for free)

• Discounting gone wild (because someone promised 15 percent off without telling

  you)

Source: Leakage explained

Acceptable Leakage Rates by Industry:

You’ll never fully plug every hole—but here’s what’s considered “normal”:

• Telecommunications: 1 to 3 percent

• Retail shrink: 2 to 3 percent (Source:

• Software/SaaS: Up to 5 percent

• Professional Services: 1 to 2 percent

Source: Leakage from theft

How to Fix It:

• Audit your invoices regularly

• Automate billing

• Track scope vs. delivery

• Set clear policies on discounts and changes

• Train your team to flag potential leaks early

You wouldn’t leave the barn door open during a storm, so why let your revenue leak because Larry in accounting forgot to hit “send”? Plug the holes, patch the cracks, and keep more of your earnings. You built it, don’t let the cracks in the system tear it down.