What is fee leakage?

Fee leakage is revenue lost between work performed and fees collected. It includes unbilled time, write-offs, discounts, and uncollected invoices. If your team logs 1,000 hours at $200 per hour but you collect only $160,000, you have $40,000 in fee leakage, representing 20% of potential revenue. Tracking and reducing leakage directly increases profitability.

Sources of fee leakage

Time worked but never billed often occurs with administrative tasks or scope-creep work that feels awkward to invoice. Write-offs reduce billed amounts for perceived overages or client complaints. Courtesy discounts erode rates. Bad debt from unpaid invoices loses everything. Each source requires different controls. Measure each category separately.

Reducing fee leakage

Improve time capture with real-time entry and mobile tools. Review work-in-progress aging weekly to catch unbilled time. Require approval for write-offs above thresholds. Track discount frequency by partner or manager. Tighten credit policies for slow-paying clients. Small improvements across multiple leakage sources compound into meaningful margin gains.