Spotting the revenue leakage

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Preparing accurate financial statements carries with it the responsibility of ensuring not only that financial figures are right and supported, but also that all financial data is completely captured. This brings up a common challenge facing growing companies: revenue leakage. Revenue leakage means goods or services have been delivered or rendered by the company, but the related revenue never ends up being recorded in the company's accounting records—and hence, never collected.

How can a growing company spot revenue leakage? Practices and controls vary by industry and company maturity. The main principle is to embrace the "keep revenue intact" mindset. Growing companies can consider applying a data-driven approach by diving into operational data, establishing relationships between data points, and investigating outliers. For a trading company, a practical example is analyzing the whereabouts of delivery receipts. Equally important is setting the right tone within the company—clearly communicating that revenue leakage is detrimental and unacceptable.

If you're navigating growth and need finance function guidance, contact VMC.

VMC's views are general insights—not one-size-fits-all advice. Every company's situation is unique.