Revenue leakage: the finished work that never became an invoice

Month end, again

In a professional services firm, month end had a familiar shape. Forty consultants sent forty spreadsheets of hours. Someone in finance merged them, checked them against the projects, chased the missing ones and built the invoices. The invoices left three weeks after the month closed, and the clients paid accordingly.

Everyone accepted the delay as the price of doing business. Nobody had measured what else the process was losing.

The person who saw it first

Omar, a finance analyst attached to the delivery team, was reconciling a late invoice when he noticed two finished tasks from August that had never been invoiced. Nobody had taken anything. The work had been done, the client had accepted it, and the hours had simply fallen between the timesheet and the invoice, because no list showed finished work that had not been billed.

He stopped chasing spreadsheets. The team began recording hours on the project's own tasks, and the project manager approved them every week. From that week, finance had one list of work that was finished and not yet invoiced. The August tasks were billed the same day. The next month, the invoice left on day three.

The textbook name: revenue leakage

Revenue leakage is the gap between the value a firm delivers and the money it collects for it. In project work it has a few familiar sources: hours recorded late or not at all, finished tasks that are never invoiced, milestones accepted by the client but not billed, and rates applied inconsistently. Each leak is small. Together they are often several percent of revenue, every year, and they are invisible in the reports because the reports only show what was billed.

Late invoices are a symptom of the same cause. When billing depends on a manual assembly of hours at month end, both speed and completeness suffer.

Signs to watch for

Revenue leakage hides in averages, so look at the edges. Invoices that regularly leave more than a week after the month closes. Hours that arrive after the invoice was built and are carried to next month, or forgotten. Tasks marked finished in the plan with no billing recorded against them. Milestones the client accepted that are still waiting for someone to raise an invoice.

Another sign is a disagreement between delivery and finance about what was done. If the project manager says the work is complete and finance has nothing to bill, one of the two records is wrong, and the difference is money.

The cost compounds. A late invoice delays cash by the same weeks. A missing invoice is often never recovered, because asking a client to pay for August in December is an uncomfortable conversation many firms choose not to have. And the margin reported on the project is wrong in both cases, so decisions about pricing and staffing are made on figures that look better than reality.

How to prevent it

Record time where the work is, on the task, while it is fresh. Approve it weekly, not monthly. Turn approved hours into cost and billable value at once, at the rate that applied on that day. And keep a standing list of what is finished but not invoiced, so the question is never whether something was billed, but why it is still on the list.

How ApprovedFlow does it

In ApprovedFlow hours are recorded on the project's tasks and approved through the project's own chain. Approved hours become cost at the rate of their day. Finished tasks and accepted milestones with no invoice appear as ready to bill on the project, so finance and the project manager see the same gap the moment it opens. Nothing waits for the month-end spreadsheet.

A question for you

How many finished tasks of yours are still waiting for an invoice, and how would you know?