Managing Director & Senior Partner
Related Expertise: Pricing and Revenue Management, Marketing and Sales
Revenue assurance is the systematic application of tools, processes, and people to stop revenue leakage—the problem of unrealized revenue from products sold or services performed. In our experience, revenue assurance can contribute as much as 10% to a company’s total revenue without the need to sell additional products or services. Revenue assurance programs can be implemented and scaled quickly, typically generating financial returns within the first one to three months. A mature revenue assurance function, supported by machine learning tools, automated processes, and dedicated full-time employees, can identify and stop revenue leakage on an ongoing basis, thereby maximizing realized revenue for companies that choose to invest in these areas.
Notwithstanding the potential payoff, most companies do not provide their revenue assurance functions with the necessary resources—even when they know it is an issue. In an international survey of more than 2,000 business leaders by Boston Consulting Group, 45% said revenue leakage is a systemic problem facing their companies. Their practices show why. Almost three-quarters of companies do not have automated revenue assurance processes. Another 64% do not have standardized revenue assurance tools as part of their enterprise data systems, and 59% do not devote any full-time staff (or full-time equivalents) to revenue assurance. (See Exhibit 1.)
Companies That Are Vulnerable
Some companies are at greater risk of revenue leakage owing to the nature of their business. Our experience indicates that the magnitude of potential revenue leakage tends to be greatest among:
The following are some examples of revenue leakage that we have observed across industries:
BCG’s Revenue Assurance Solution
With our revenue assurance solution, we efficiently identify sources of revenue leakage and potential ways to implement quick wins, scale solutions, and build capabilities—giving our clients the know-how to sustainably capture value. We use best-in-class digital tools enabled by robotic process automation, machine learning, natural language processing, predictive modeling, and other next-generation technology to help clients excel at revenue assurance.
Our three-step approach diagnoses sources of leakage, implements small-scale solutions to quickly capture value, and then scales up those solutions. (See Exhibit 2.) In the scaling-up phase, we also lay the foundation for clients to develop the capabilities needed to sustain their revenue assurance programs for the long term.
Step 1: Diagnostic. We work with our clients to diagnose sources of leakage and prioritize revenue assurance levers for quick wins. This data-driven process evaluates multiple factors, such as the magnitude of revenue leakage, the feasibility of implementing specific levers, and the organization’s current capabilities and appetite for change. We also consider extrinsic factors, such as industry trends, economic headwinds, and customer behaviors that can impact our clients’ ability to recover leaked revenue.
For instance, our diagnostic work at one client—a European postal service company—made it clear that the majority of the client’s customers (77%) were not meeting contracted terms. Based on the findings from the diagnostic, we helped the client develop a robotic process automation tool that was then integrated with its customer relationship management system to automatically alert sales representatives to leaked revenue and provide a fact base for the reversal of unearned discounts.
Step 2: Quick Wins. We implement small-scale solutions to quickly identify and recover leaked revenue within the first one to three months of a revenue assurance program. This starts with the conception and testing of changes to existing tools and processes. For instance, at one chemical services company with revenue leakage from inconsistent pricing, we piloted initial process changes on the largest accounts. The economic value of the changes became apparent in the first month, generating the momentum needed within the company to roll out these changes more broadly.
Step 3: Scaling. Following testing and improvements to tools and processes in the quick-wins phase, we scale solutions and enable client capabilities for sustainable revenue capture. At the scaling phase, revenue assurance works its way into the DNA of the company, typically within the first six months of a program. We ensure that the new tools, processes, and capabilities continue to have a material payoff long after our involvement has ended.
For instance, a global technology company incorporated robotic process automation and machine learning tools and processes to identify revenue leakage. The tools allowed the company to increase its annuity revenues and out-of-scope billings by $54 million annually. (See “How One Company Dramatically Upped Its Revenue Assurance Game.”)
When to Start a Revenue Assurance Program
There are three ways in which a revenue assurance program makes sense. The first is as a standalone effort to unlock incremental revenue. With no additional selling cost, the newly realized revenue is largely profit. In these cases, we generally see companies’ revenues increase 3% to 5%.
A second type of revenue assurance program is connected to a broader initiative around pricing. In these engagements, the new discipline surrounding revenue assurance ensures that companies capture all the benefits of the pricing transformation initiative. This type of program can substantially increase the impact from pricing, driving incremental revenue of 1% to 10% in our experience, including the capture of revenue leakage.
A revenue assurance program might also make sense—even for companies with minimal revenue leakage and well-established revenue assurance capabilities—as part of a new product or service launch. Revenue leakage is common with new products and services (especially in adjacent industries) because of the need to link together new systems and the use of limited-time promotional discounts. Companies that strengthen their revenue assurance practices in advance of product launches can prevent revenue leakage in these situations.
Revenue assurance solutions can drive significant value for companies—up to 10% of revenue. And the impact of efficient revenue assurance goes well beyond revenue capture. With more efficient audit processes, employees can focus on creating value for their companies in other ways. Additionally, more accurate invoicing can reduce customer pain points and dissatisfaction, thereby creating positive momentum.
Integrated tools and processes can help your company develop its own capabilities in this important area. Once you have built these capabilities, the returns from revenue assurance become cumulative. Revenue assurance can be a significant driver of value for your company, which we can help you achieve.
The authors wish to thank Adam Gordon, Aljoscha Zahner, Jake Simon, and Rolf Erik Tveten for their contributions to this article.