How do you calculate the ROI of Revenue Intelligence?

You calculate the ROI of Revenue Intelligence by setting the return (recovered revenue, recurring leakage stopped, new leakage prevented and time saved) against the total cost (licence, implementation, data clean-up and internal time for follow-up). The formula is simple: return minus cost, divided by cost. The work lies in filling it in honestly: use what you will realistically recover rather than what you find, and a low estimate of leakage rather than an average.

The formula

Two figures matter.

ROI = (return in the period minus cost in the period) / cost in the period

Payback period = total cost of year one / monthly return after the ramp-up

An ROI of 200 percent means that for every euro you spend, you get three back: your euro plus two euros of profit. A payback period of four months means that after four months you have earned back the investment and from then on only have the return.

Calculate both over year one and over three years. Year one is the strictest test, because all implementation costs fall there and the return still has to build up. Over three years you see the real return.

Step 1: determine the return

The return has five components. They are not all equally certain.

Recovered revenue (one-off)

Past revenue that you now invoice after all: a forgotten invoice, additional work that is not yet too old, an overdue invoice that gets collected. This is a one-off return, usually concentrated in the first months.

Recurring leakage stopped

Subscriptions that are corrected, indexations that are applied, discounts that are ended. This pays off every year. It is the most important part of the return, because it repeats.

New leakage prevented

Leaks that arise after the platform is running, but are found within days or weeks rather than after a year. Hard to measure, because you are measuring something that did not happen. A practical approach: the difference in how long a leak stayed open before and after.

Time saved

Hours that finance, sales and operations no longer spend on manual reconciliation, investigation and correction. Measure it beforehand, so you have a baseline.

Working capital

Invoices that are sent sooner and paid sooner. Value: the amount x the number of days earlier x your cost of borrowing. Usually a small item.

How large the leakage is in your company, and therefore how large the first two components can be, is calculated with the method in how to calculate revenue leakage. What leakage costs beyond the direct revenue is covered in what revenue leakage costs.

Step 2: correct the return

This is where most business cases go wrong. They take the leakage found as the return. Three corrections are needed.

Realisation rate. You do not recover everything you find. A discount that has run two years too long is rarely clawed back. A customer who has been paying too little for months is not confronted with a large back-invoice if you want to keep the relationship. Use a realisation rate: what share of the amount found actually becomes revenue? For the ongoing part (invoicing correctly from now on), it is high. For the past, it is lower.

Attribution. Would you have found the leak without the platform? If your finance team already runs a sample every quarter, it would have found some of the leaks anyway. Count only what you would not have found without the platform, or would have found much later.

Ramp-up. The return does not start on day one. Systems first have to be connected, data cleaned up and people have to learn to work with the findings. Assume a lower return for the first months.

Step 3: determine the cost

Include all costs, not just the licence.

• Licence or subscription.
• Implementation, by the vendor or by your own team.
• Data clean-up.
• Internal time for following up findings.
• Training.
• Administration and maintenance.

Which pricing models exist and which costs come on top of the licence is covered in what a Revenue Intelligence platform costs.

Step 4: run the numbers

Worked example: a company with EUR 12M revenue

Suppose your company has EUR 12M in revenue. All amounts below are examples to show the method. They are not expectations for your company and not prices of any existing vendor.

Assumptions

• Leakage: 1.5 percent of revenue = EUR 180,000 a year. Of that, EUR 120,000 is recurring (prices, subscriptions, indexation) and EUR 60,000 is one-off each year (forgotten invoices, additional work).
• The platform finds 70 percent of it in year one.
• Realisation rate: 80 percent of the recurring part, 50 percent of the one-off part.
• Attribution: 20 percent of what is found would have been found without the platform.
• Ramp-up: no return in the first three months.
• Time saved: 20 hours a month x EUR 65 = EUR 1,300 a month.
• Cost in year one: licence EUR 30,000, implementation and clean-up EUR 8,000, follow-up 10 hours a month x EUR 65 x 12 = EUR 7,800. Total EUR 45,800.
• Cost in years two and three: licence EUR 30,000 plus follow-up EUR 7,800 = EUR 37,800 a year.

Return in year one (nine effective months)

• Recurring: EUR 120,000 x 70% x 80% x 80% (after attribution) x 9/12 = EUR 40,320.
• One-off: EUR 60,000 x 70% x 50% x 80% x 9/12 = EUR 12,600.
• Time: EUR 1,300 x 9 = EUR 11,700.
• Total: EUR 64,620.

ROI in year one: (EUR 64,620 minus EUR 45,800) / EUR 45,800 = 41 percent.

Return in year two (full year, the recurring part continues, the one-off part recurs, time saved in full)

• Recurring: EUR 120,000 x 70% x 80% x 80% = EUR 53,760.
• One-off: EUR 60,000 x 70% x 50% x 80% = EUR 16,800.
• Time: EUR 15,600.
• Total: EUR 86,160.

ROI in year two: (EUR 86,160 minus EUR 37,800) / EUR 37,800 = 128 percent.

This is a cautious calculation. It does not count prevented new leakage, working capital or compounding indexation. Even so, the ROI is positive in year one and comfortably positive in year two. That is the kind of business case a finance director wants to see: not a high number, but a number that holds up under cautious assumptions.

When does Revenue Intelligence pay for itself?

The payback period depends mainly on three things: how much is leaking, how quickly the platform produces findings and how quickly your team acts on them. In the example above, the monthly return after the ramp-up is about EUR 7,180. The year-one cost of EUR 45,800 is then earned back after a little over six months of effective return, so around month nine or ten after the start.

Three things shorten the payback period:

1. Start with the biggest leaks. The first findings are often the most valuable, because they have been running longest.
2. Make sure follow-up is in place from day one. A finding that sits for three months delivers nothing for three months.
3. Limit implementation time. Connect the two systems where most of the leakage sits first, then expand.

Step 5: test your assumptions

Run the same calculation with lower leakage, for example 0.75 percent instead of 1.5 percent. In the example, the revenue return in year one then halves to about EUR 26,500, and with the time saved added you arrive at around EUR 38,200. That is below the year-one cost. In year two, at about EUR 50,900, you do come out above the EUR 37,800.

That is valuable information. It tells you that with low leakage the case only turns positive in year two, and so it pays to know first how much is really leaking. Whether your leakage is high enough to justify software is covered in how much revenue leakage justifies software.

Step 6: measure afterwards

A business case is a prediction. After six and twelve months, you want to know whether it held.

1. Record a baseline beforehand. How many hours does finance spend on reconciliation now? How many discrepancies are found per quarter now, and how old are they?
2. Track each finding: amount, type (one-off or recurring), status (resolved, recovered, written off).
3. Count after six months: total found, total recovered, total corrected going forward.
4. Compare with your assumptions. Is the realisation rate right? Is the ramp-up right?
5. Adjust. Update the calculation with the actual figures and base your decision on renewal or expansion on that.

For the broader question of which returns you can expect at all, see what Revenue Intelligence delivers.

Frequently asked questions

What ROI is realistic?

There is no reliable average. It depends on how much is leaking in your company, what the platform costs and how well your team acts on the findings. Be wary of business cases whose ROI only works with high assumptions. Run the numbers yourself with a low estimate.

Should I count time saved?

Yes, if you measure it beforehand. Time saved is only a return if that time goes to something else. If the team stays the same size and the hours are not redeployed, it is a benefit, but not a saving in euros.

Why is year one so much worse than year two?

Because the implementation costs fall in year one and the return still has to build up. Recurring leakage you stop in year one delivers a full year in year two. So always judge an investment in Revenue Intelligence over at least two years.

How do I calculate ROI if I do not yet know how much is leaking?

With a range. Run the case at the bottom of the commonly cited estimate of 1 to 5 percent, and at a midpoint. If the case only works at the high end, first establish how much is really leaking in your company.