The four places revenue goes missing
Contracts, usage, billing and payments each have their own way of losing money. Here is what to look for in each.
Controls ranked by exposure: usage to invoice coverage, contract to billed rate, minimum commitments and seats to subscription quantity.
If you bill for software, revenue can leave in four places: what was agreed, what was used, what was invoiced and what was paid. Each has its own failure mode, and each is owned by a different team. That is why leaks last: everyone's own system looks fine.
In the contract
The contract is where price, discounts, renewals and minimum commitments are agreed. A leak starts here when a term is agreed but never reaches the system that bills for it.
- A renewal uplift in the contract that is never applied when the term renews.
- A minimum commitment that the invoices don't enforce.
- A discount that is richer in billing than in the contract.
In usage
For usage-based pricing, the contract defines what usage costs, and the product meters what was used. A leak appears when metered usage never turns into an invoice line: for example, an overage above an included allowance that nobody bills.
In billing
Billing is where terms and usage become invoices. Leaks here are small and quiet: a line that is missing, a seat count that is out of date, a rate that doesn't match the contract. They are easy to miss because each one looks like a normal invoice.
The per-seat price is invoiced, the usage above 8M units is not invoiced, and the discount billed is 5 points over the contract.
In payment
The final place is collection: an invoice that is paid, but not for what it said, or not at all. Checking payments against invoices closes the loop, and it is the step that shows whether a leak was ever recovered.
Check all four, the same way, every time
The common thread is that no single system can see the leak. It shows up only when you compare them. Controls like usage-to-invoice coverage, contract-to-billed rate, minimum commitments and seats-to-subscription quantity each compare two of the four places on a schedule. Droplet runs controls like these as standard, and adds custom detection rules on the Scale plan for terms that are specific to you.
