The Leading Causes of Revenue Leakages—Learn How to Mitigate Disruption in Recurring Revenue Streaming

The loss of hard-earned money sounds dreadful to every subscription business. It isn’t always necessary that the loss occurs due to any major imprecision or drastic damage. Often, it is the steady drip of small losses, here and there, that creates a mammoth gap of earned revenue and profit.

The base of the subscription businesses is recurrence. And, recurrence is everywhere—from operations to management to customers and billing to payments to revenue monitoring. It often happens when the subscription businesses grow their targeted market and expand their customer base, they lose track and miss the management of the weak points from where the revenue has started dripping. Over time, the leakage hole is stretched and sweeps away quite a revenue.

It is called revenue leakage that can be occurred for several reasons and often are hard to control. It looms countless threats for subscription businesses. It is inevitable for the subscription businesses to keep tracking and mitigating the small losses due to revenue leakages by building control around them.

This article focuses on all the temporal, casual, and proximal causes of revenue losses in any subscription business and the ways that can plug the revenue leakage and minimizes the reparations to the recurring revenue streaming. We also take a look at how revenue leakages can be damaging to the growth and management of the subscription businesses.

What is Revenue Leakage?

In simpler words, Revenue Leakage is the loss of money. It could be any unnoticed and unintended loss of revenue businesses allow to slip through their fingers due to mismanagement, negligence, or errors in handling expenses, customers, barriers in earnings, delays in payments, and operations of subscriptions.

Small-scale or enterprise—the revenue leakage is not a friendly term for the subscription business.

Some reports suggest quite an increase in the revenue leakages. Last year, MGI reported more than 40 percent leakage in the revenue companies has been suffering as their overall monthly or annual recurring revenue increases.

This is quite a higher rate and could be devastating to business growth. Small businesses and startups cannot survive the depreciating profits due to the revenue leakage. On the other hand, even a small percentage of the revenue loss is daunting for the bigger subscription businesses.

For instance, a company is earning USD50M a year and at the same time is experiencing a revenue leakage as high as 10 to 15 percent. It means the business is suffering whopping preventable losses for USD5M to USD7.5M a year that can add up quite an impact to its bottom line.

Also Read: What to Expect in 2021 and Beyond? Top Predictions For the Subscription Market and Subscription Management


How to Identify the Key Origins of Revenue Leaks

Revenue leaks often would not be identified until their impact has become enormous. Studies found the 90 percent of the companies are not able to trace the revenue leakages themselves. Mostly, some are very basic in their conduct whereas some could be complicated and are hard to identify or even to cope with.

But there are some ways that can make it quite simpler and optimize the process of identification, recouping, and prevention of losses by inspecting the weak points in the business conduct, revenue streaming, analyzing process, and management.

It is always not as easy to find these leaks but there are some ways that can help the businesses to track if there would be any escapes from where the revenue is slipping slowly and gradually:

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  • Data Mining—Sieving through the subscription growth, transactions, conversions, and recurring billing data can help subscription businesses to trace the gaps that are becoming the reasons for revenue flows.
  • Unusual Anomalies—Unusual numbers reveal themselves. Often, the slight differences when overlooked for long, they start appearing in the sheets as some anomalies that require scrutinization.
  • Following Up—Following up with lead qualification, lead scoring, customer statuses, payment delays or declines, and queries also assure the well-being of revenue channels.
  • Third-Party Data Sharing—Using business intelligence tools and analytics from other applications for sales, marketing, finance, and support in addition to the subscription management and leveraging their data also help to amend the leakage points.


What Causes the Revenue Leakages in the Subscription Business?

As we have discussed, there could be several reasons that can cause the revenue to flow through the leakage points. However, experts have identified the following few causes that increasingly intruding the revenue goals due to unintended and unnoticed losses. Here are the six prime roots that are sucking the revenue bit by bit:

  1. Discrepancies in Q2C Contracted Value Due to Gap Between Quoted Amount and Billing Amount

Q2C or Quote to Cash process in the subscription business is an intricate process where the gap between what was the final quote at the time of contract easily lost track and can drastically be different from what is billed at the end of the term. The discrepancies that cause a depreciation towards the revenue target are the result of the revenue leakage dripping at different points as negligible losses and impact overall contracted value.

  1. Consumption Leakage in Metered Billing With the Difference Between What is Used and What is Build

Pay-per-use, metered, or usage-based billing is one of the most flourishing trends particularly for the SaaS and subscription businesses as it allows them to cater to every customer and let earn more by charging different features separately or allowing users to consume more so they can be charged more. However, this model has its own drawbacks, too. As the customers are getting more conscious of their use and keep their eyes on the recurring billing meter, it is causing consumption leakage as well. This is the loss of revenue that can be earned but couldn’t.

  1. Forceful Churn—The System Deficiency to Identify and Measure the Customer For the Renewal Process

Involuntary or forceful churn is the most excruciating loophole in an unintentional flow of the revenue through the leak points. When the payments get declined for any reason, often the accounts for the customers are suspended.

Often the billing and revenue management systems are unable to find the risky customers and measure their potential to identify whom to consider during the renewal process. The system deficiency to select the right customers for the auto-renewal process often cause the loss of the right customer that can become a healthy source of recurring revenue streaming.

  1. Repeated Customers Using Trials and Free-Features

Companies offer their physical as well as digital products to the customers to test and then continue with the paid plan with more features or benefits. But, this can become a cause of revenue leakages if there is no check and balance system to track the users who are taking the free-trials again and again via multiple email accounts or contact numbers and are not converting into a source of revenue.

  1. Cost Leakages Due to Charging Customers When their Credit Cards Expired

Cost leakages due to various reasons incur more dent to the revenue growth. One such slip of revenue is due to charging the expired credit card. Every time a credit card is charged, payment gateway charges too. Every re-attempt costs and overtime, it multiples into a bigger figure.

  1. Unchecked Manual Recurring Billing Errors In Complicated Spreadsheets

Subscription billing and payment processing is a complicated process and when the business grows its bottom line, it becomes difficult to manage the recurring billing, manually.

Some of these errors and incompetencies are frequent in the manual recurring billing and payment processing:

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  • Incorrect data entries
  • Unsent invoices
  • Untracked payments
  • Unclear payment timeframes
  • Unmonitored profitability
  • Unchecked generous discounts
  • Untransparent spreadsheets


Also Read: From Robust Reporting to Increased Efficiency—The Benefits of Automated Recurring Revenue Management

How to Plug the Recurring Revenue Leakages?

Mitigating the revenue leakages requires to take some robust action on a larger scale that can combat the loss of the recurring revenue through increased surveillance at multiple checkpoints—from uninterrupted monitoring of payment and conversion follow-ups to mining the data and finding the unnoticed revenue sources that can turn into a profitable turning point for the revenue growth.

Some of these are:

  • Build Controls Around Revenue Leaks and Profit Losses

Subscription businesses are required to build controls around some of the following essential revenue leakage points. These controls can be part of the management of subscription processes, subscription software, or risk analysis process:

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  • Control around the Q2C process to track the negative difference between the quoted amount and the billing amount in real-time.
  • Control to find the consumption leakage with the monitoring of the resources so that it can be measured that what has been used and what has been built.
  • Control around the auto-renewal process to constrain the forceful churn.
  • Control to mitigate the repeated trials of the customers.
  • Control around the causes of the payment declines to mitigate cost leakages.


  • Eradicate Revenue Errors—Automate and Optimize Subscription Billing Process

It is the age of the subscription economy. The SaaS and subscription businesses are dealing with the customers in millions and billions and they charge them for months and months. Manual billing is now obsoleting and replacing the manual billing landscape with overwhelming subscription management software.

The subscription software automates the recurring billing from generating an invoice to charge a customer for payment processing and allows the subscription business managers to leverage the cognitive technology to find the revenue leakages in real-time and offers suggestions and recommendations to mitigate them.

For instance, SubscriptionFlow is an automated subscription billing platform that offers Ai-enabled modules to optimize billing and payment processing with features like pricing engine, multiple billing models for customized billing, leveraging data to streamline other RevOps. SubscriptionFlow also offers intelligent dunning management solutions to recover revenue by suggesting scheduled and targeted payment re-tries to avoid cost leakages.

  • Enable Recurring Billing Software to Combat Involuntary Churn and Preserving Revenues

When the customer base has grown in horizontal and vertical directions, often businesses turn their eyes from focusing on operational diligence and forget to preserve all the revenues that can be owed.

The subscription businesses must know that their revenue vessels are not leak-proof. The best way to identify even the small leaks in the revenue stream is to enable the recurring billing software to combat some of the most threatening subscription revenue streaming issues including churn and loss of revenue due to unnoticed changes that can turn into revenue anomalies overtime.

With SubscriptionFlow, optimize your recurring billing process and see everything going around in the subscription system with the highly customized dashboard. From monitoring the subscription analytics to get the real-time reports and identifying the status of the payments to the subscription health of the subscribers, SubscriptionFlow offers several solutions to plug the revenue leakage.

Also Read: Subscription Management Mastery—How to Get Started with SubscriptionFlow in 2021