Every penny of revenue leakage fixed and an invalid cost
eliminated has a direct impact on EBITDA… after my early journey working on
projects which were of the very nature of Quick fix and implementation of best
practices and the organization tasted the success to quite a good extent
savings few million dollars the next big project I picked up and built a
focused team was to Identify every opportunity of Revenue Leakage and fix it.
We identified all areas both in delivery and support
functions the potential candidates of revenue leakage and start collecting data
around it. It took more than a couple of months to streamline the operational
definition for revenue leakage and a series of meetings with various
stakeholders and the user community we finally agreed on the common operational
definition and what finance team will
sign off (this was very important step) as savings generated by fixing the
revenue leakage.
We defined Revenue Leakage as “Money not recovered on time
either from the customer or the vendor or employee. Any outward cash flow as a
deviation or exception to the set policy or process in place will be considered
as Leakage”
Clear instruction on this project was no notional savings
will be considered unlike other projects where cycle time savings were
multiplied with a volume number and quoted as notional savings.
We picked up the following three areas to fix in this fiscal
where an opportunity for leakage occurs…
1. Days
Out Standing / Accounts receivables
2. Recovering
Advance Payments from employees (ForEx and Travel related)
3. Leave
management in T & M assignments
As a next step we started measuring to baseline where we
stand internally and in comparison with industry benchmark. A dedicated team of
data analysts were hooked up with the finance team to conduct a data collection
exercise and we engaged with a third party consulting firm to benchmark our
company with the competition to understand the variation.
While this exercise consumed time there was a definitive
number that popped out, of course it was not easy to gather consensus from all
and again a series of brainstorming sessions following with what is in scope
and out of scope, what should and should not be a part of the data and the
further debates took about a few fortnights to finalize. In this entire
endeavour while the support from the senior management continued to exist it
was a herculean task to gather the support and time from middle management and
build the momentum. Mobilizing commitment looked very bleak at the very
beginning of the exercise and we had to struggle to get the information from
all sources and plug into an excel tracker before coming up with a baseline
number … The irony is that the very people you need on the ground hands on are
already overburdened with so many activities and tasks that often makes it very
challenging to accomplish some simple tasks…. Nonetheless we did it…
The next step that we took based on the inputs from the
subject matter experts and the inputs provided by the third party consulting
firm who did come up with initial recommendations after the bench marking
exercise was to look at the entire set of events and classify them into three
broad categories and established role / process clarity to address the
situation…
1.
Risk Management : The role of this
group was to look at every opportunity and map it with the existing processes
and identify possible risks and then address them appropriately as per the risk
matrix
2.
Leakage Management: The very role of
this team was to constantly look at all opportunities in the existing mechanism
the possible leakages and overcome them. Under the umbrella of leakage
management we had a couple more sub teams formed to strengthen governance and
compliance especially around the SLA Clarity and automation. A separate operations
team looked at contracts, warranties, and entitlements. We strengthened our
internal interdependencies and raised the need to connect them together… data
always exists but is difficult to access… by connecting and overcoming the dependencies
and the strengthening the online repository which connects the business
operations, sales, compliance, finance, and the delivery with PMO and Governance
team working hand in glove was quite a challenging tasks that took sometime to
shape up quite well and now we have a strong recommendation in place to have a
team of dedicated and focused group of experts who look at wing-to-wing service
life cycle
3.
Leakage Prevention: The very challenge
we faced in this situation is educating the folks on the difference between
customer satisfaction and billable assignments… while it’s important to address
the needs of the customer, it’s important to educate the customer the services
offered will come at a certain cost especially in a T&M mode where every
minute is billed. When brainstormed further we discovered the root cause is the
contract document availability and access to the engineers on the field onsite
with the customer who are unable to understand if the piece of work they are
doing is covered under the terms and conditions or the post maintenance activities
or not… there was a huge cry on confidentiality and other such stuff during the
arguments which many initially made a noise and finally agreed on the sharing
the contract knowledge to ensure things fall in place…. What the very human
nature filled with unknown insecurities stops the CRM software’s help the folks
onsite with the customer and a very learning we discovered is having access to
critical customer data helped cross-selling and upselling thus helps the
revenue stream...
Very strong and stringent monitoring of advance payment collections and associated
tools which connect the pay-outs and collections were put in place and the IT Team
started working on the tool enhancements
Inputs
were shared with the HR team on the leave management policies to be revisited
which can help the revenue leakage, a set of senior department heads with the
HR team coupled together to come up with a policy around the same, addressing
employee related sensitive areas need extra time and caution on the roll out of
the policy and so measures and steps were put in place to ensure the
communication is seamless…
Analytics with dashboards showing
Red , Amber, Green (RAG) status are in place, the team will continue to monitor
the progress periodically and few months down the line I will again engage with
the team to see if the controls put in place are adequate enough or additional
things are required to be done…
In a nutshell my learning out of
this episode can be summarized as below…
1. Human
nature is the most important one to focus up on; we already know all the
solutions but lack action to accomplish it… processes have to flex with the business when ever business and the people running the business demand it
2. My
facilitations skills matured further working with folks from various teams and
getting them all together in sync and signing off an agreement on the new
process
3. Digitizing
the solutions and cementing the structure using an IT Tool is the only way to
strengthen the control… nonetheless we live in an excel based world and
exceptions are a part of it, no matter what controls one puts in, someday the
exceptions and ad-hoc processes will overcome the discipline and one needs to
revisit for continuous improvement that is incremental in nature…
A potential cash flow greater
than USD 5 Million year on
year is the initial estimate with the recommendations and process changes put
in place… 
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