Businesses are leaking billions of pounds in revenue each year and don’t know how to prevent it, putting jobs at risk, it has been claimed.
Research has shown that, on average, UK companies estimate that 5.87 per cent of revenues remain uncollected each year – equating to £244 billion annual losses.
And seven in ten told researchers they are aware revenue leakage is a problem, but don’t know how to prevent it.
This was revealed in a report headed Missing Billions by the data consultancy Sagacity, one of several released this week that help to paint an interesting picture of life in corporate finance today.
They surveyed 200 professionals with P&L responsibility in telco, insurance, energy and water industries and found that almost half of the loss comes from errors with data, controls and oversight, including human error, such as manual data entry into multiple systems.
Businesses need a holistic approach to understand exactly how and where revenue leakage is happening, but this is easier said than done
Other factors were a lack of oversight, poor processes, governance and controls and poor data reconciliation.
“The amount of money being left on the table is shocking but perhaps equally worrying is that many businesses have their heads in the sand, with two thirds saying that revenue leakage is unavoidable, and the less said about it, the better,” said said CEO Anita Dougall.
“While many of the problems uncovered are not due to a simple lack of effort, businesses can take effective action to stem the tide. Businesses need a holistic approach to understand exactly how and where revenue leakage is happening, but this is easier said than done.”
Separately, a massive drop-off in business card use since the pre-Lockdown era has resulted in only one in 10 small firms now using them. Figures from Finder.com showed a fall of 1.05 million in 2020 to 605,000 last year.
The analysis of BVA figures also found that a third are now injecting personal funds into their businesses.
Credit card applications also made up just five per cent of external financing applications between July 2021 and December 2022, a far less popular option than bank loans, which made up 50 per cent.
Authors say that, with 95 per cent of these micro businesses employing as few as nine people or less, micro bosses may prefer to use personal funds to free up cash flow, rather than risking taking on too much debt. Another factor may be the steep interest charges that can quickly add up if repayments are not made promptly.
Around half of organisations in the sectors do not provide relevant information such as posters and leaflets as they are obliged to do under Health and Safety Executive rules
But experts argue there are advantages. Emily Herring, Finder’s credit expert, said: “Some small businesses are wary about signing up for a business credit card, but if you’re responsible with how you use these cards, they can offer important benefits.”
Those with a limited credit history or a poor business credit score, can actually use them to build it up, she said.
Another study revealed that two thirds of accounting, banking and finance firms don’t provide health and safety training for employees. And one in six do not have a policy in place, according to a survey of 1,500 business to determine how small businesses in the UK treat risks to the public.
The report revealed that around half of organisations in the sectors do not provide relevant information such as posters and leaflets as they are obliged to do under Health and Safety Executive rules.
Business insurers Hiscox also revealed that a fifth do not consider health and safety a priority, a trend they say is corroborated by 13 per cent of businesses failing to sign up for public liability insurance.
And they warn that the potential consequences for business leaders whose companies are involved in accidents go beyond the financial. According to the survey, businesses have also experienced a reduction in performance indicators, material solvency, difficulty attracting new customers and bad publicity.
Financial firms are most likely to incur costs of up to £10,000 as a result of injuries on the premises, they say.