Revenue leakage

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Querist : Anonymous

Querist : Anonymous (Querist)

23 May 2014 How do we apparoach to find out REVENUE LEAKAGE in the organisation ? any better steps ?

mtvcamba

mtvcamba (Expert)
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23 May 2014 Depends upon what kind of business the organization is in.

However given a opportunity i would study the business in the following order :

a. List of Inflow the business has got

b. The out flow of the business

c. Subsidy and taxes review to find whether the company is paying all taxes correctly and there is over payment or under payment.

Querist : Anonymous

Querist : Anonymous (Querist)

23 May 2014 Nature Of Business:- Software Development, Implementation and Maintainance.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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22 July 2025 Identifying Revenue Leakage in a Software Development, Implementation, and Maintenance company requires a structured audit approach focused on both operational and financial dimensions. Here’s a step-by-step approach tailored to your business type:

🔍 1. Understand the Revenue Streams
Start with a detailed mapping of how revenue is generated:

Development Contracts (fixed price / T&M)

Implementation Services

Maintenance & Support (AMC)

Licensing Fees (if applicable)

SaaS or Subscription Income

Change Requests / Enhancements

Third-party commissions or affiliate programs

📉 2. Common Areas of Revenue Leakage (Specific to Software Companies)
Area Possible Leakage Points
Time-based billing Unbilled hours, time not logged properly, scope creep without change order
Fixed price projects Underestimation, free scope expansions, delayed billing milestones
AMC/Maintenance Missed renewal invoices, outdated rates, incorrect service period tracking
Change requests Not documented or not invoiced
Discounts/approvals Unauthorized or untracked discounts
Contractual terms Mismatch in deliverables vs. billing, delays in contract signoff
Licensing Under-reporting of usage, clients exceeding licensed limits
Collections Late invoicing, weak follow-up, credit policies not enforced
Foreign currency FX losses not accounted, incorrect rate application
GST or TDS errors Over/under payment, incorrect input claims, missed reversals

🧭 3. Steps to Identify & Prevent Revenue Leakage
✅ A. Contract Review
Check for complete and signed SOWs

Match contractual terms with billing and delivery

Review pricing, escalation clauses, and billing milestones

✅ B. Time Tracking & Billing Audit
Reconcile timesheet hours with billed hours

Cross-check project tracker with invoicing

Flag unbilled or underbilled efforts

✅ C. Change Request Management
Review all project changes

Verify documentation and whether additional billing was raised

✅ D. Subscription & AMC Monitoring
Maintain centralized list of active AMCs and renewals

Use alerts for renewal reminders

Audit billing accuracy and timing

✅ E. Revenue Recognition Practices
Match revenue recognition policy with Ind AS/IFRS norms

Avoid early/late recognition—especially in milestone or SaaS models

✅ F. Tax Compliance Audit
Cross-check GST input/output

Review TDS deductions and deposits

Ensure all tax credits are claimed

✅ G. Customer Receipts & Collections
Reconcile invoicing with collections

Flag long-pending receivables and reasons

Check for write-offs that might have been avoidable

📊 4. Use Tools for Automation
ERP & Project Management Integration (like SAP, Zoho, Odoo)

Billing & Time Tracking (Harvest, TSheets, JIRA + Tempo)

Contract Lifecycle Management (CLM) tools

Alerts for Expiry of AMCs, Contracts, Licensing

📌 Conclusion
“Revenue leakage in software services often hides in operational inefficiencies: poor time tracking, under-billing, scope creep, and misaligned contracts. A proactive audit approach, process automation, and tight contract controls are key to detecting and eliminating leakages.”

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