I'm glad you asked!  Let me recount a problem I had a while ago with my water bill. 

Darwin, where I live, is in the tropics.  So we essentially have two seasons only, commonly and somewhat unimaginatively known as the Wet and the Dry. During the Dry we can go for 5 - 6 months without a skerrick of rain, but the weather more than makes up for it during the Wet.

A tropical storm is a wonder to behold, towering thunderheads, incredible lightening.  Darwin supposedly has more lightning strikes each year than any other city, anywhere.  NASA has even sent special aircraft out to study the phenomenon.  But I digress.

As there is no rain during the Dry (obviously) if you have a garden you need to water it.  Most of us install automatic reticulation.  So the reverse applies during the Wet, and we turn our reticulation off.  Bear with me, I'm getting there.

We are billed quarterly. If we were billed monthly I might have picked up the problem earlier.  (Hint - that is why you need to look at your accounts and other KPIs on at least a monthly basis.)    It was a Wet Season bill, and my bill was more than double what I was expecting.  Why was it so?

There were no leaking taps, water spurting or even dripping anywhere, either in the house or in the garden.   No lush green patches.  Being the Wet the garden was all lush and green.  So where was the problem, had how did I find it?

In the end I found it by accident, treading into a very mushy bit of garden.  But that was pure luck.  I would have found it eventually, by careful examination.  And underneath the mushy bit was a split pipe, from whence all the water was leaking.  But finding leaks by accident is just not good enough.

And that is the problem you may have in your business.  Sometimes the leaking tap is pretty obvious.  A particular line, or activity is obviously costing you money.  If you can see it, youcan do something about it.  But what about the times when you don't know profits are leaking.  You don't know until you get the quarterly, or half yearly or, even worse, the annual figures.  Because by then it is too late.   The profits have leaked.

Sure, you might then plug the leak, but what is gone is gone.

So maybe you need to be a profits leak detective to find out if there is a leak, and to do something about it.  Are there aspects of your business which are not doing as well as they should?  Hidden leaks.  Are you in markets which don't perform as well as others do you could be in?  Do you really know your Cost of Sales?  If you don't, I'd be willing to bet you are not covering all those costs, and are writing them off against overheads. 

The leak could be anywhere.

 r& i ag2AdamG

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Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?

  • Get 21 Questions that help identify tell-tale clues of a profit leak.