What is sales leakage?

Over time, sales leakage can haemorrhage company funds - so what does the term mean, and how can ERP software help prevent it?
May 30, 2023
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5-min read

If you're a supplier or distributor, sales are the backbone of your business. So, if you've noticed a drop in sales, you need to be able to pinpoint the cause and put a clear strategy in place. If you're feeling unsure about where to start, don't worry.

In this post, we'll explain what sales leakage is, why it can make a huge impact on your business - and how our innovative ERP software, Profit4, can help you to prevent sales leakage.

What is sales leakage?

Sales leakage is revenue that is lost from your business, usually due to inefficient business practices or human error.

For example, if you're frequently experiencing stockouts, you may lose some long-term customers - and their money too. Meanwhile, if your customer service team is unaware of the issue, they won't be able to follow up with these customers. This means that sales your company would otherwise have made have leaked” out of your business - and into the hands of competitors.  

The issues in the example above could have been resolved with more efficient purchasing, inventory management and customer service systems in place. Stockouts can be avoided through automated purchasing processes. Meanwhile, clearer reportage and a streamlined CRM system can keep your customer service teams aware of any leakage.

Why does sales leakage matter?

The answer is simple - continued sales leakage over time will haemorrhage funds from your business. Whilst losing a customer on occasion is relatively easy to manage, sales leakage is something you cannot afford to affect your business.

Fortunately, there's a simple way to take control of sales leakage within your business. It's all about streamlining your processes and improving your inventory and customer service management. Utilising ERP (enterprise resource planning) software can help to tackle each of these issues - and there's one that covers everything you need:

How to prevent sales leakage

To start with, you need the right tools to take a proactive approach to customer management, stock control, reporting and more. OGL's Cloud-based ERP software, Profit4, places everything you need at your fingertips. But how can you use it to prevent sales leakage?

Review sales reports

First, preventing sales leakage requires full visibility. How can you keep customers returning to your business without knowing their sales history? You need to have a clear understanding of what a customer has bought from you and when - along with broader sales data from your business.

With Profit4, along with sales reports, you'll have access to each customer's full purchasing history. This means you can see at a glance whether their sales have gone up or down. You'll also be able to drill down” further into this information to locate sales details of specific products.

So, for example, even if a customer appears to be buying more from your company, they may have reduced their sales in a specific area, such as tools. If your sales and customer service teams have access to this information, they have the opportunity to discuss this with the customer - and potentially recover the sale.

Streamline inventory management

Another major culprit for sales leakage is stockouts. That's because stockouts mean slower dispatches and fewer sales. In turn, that means a poorer customer experience. According to one study, inventory distortion costs retail businesses around $818 billion worldwide each year, with stockouts contributing to 56% of this loss.

So, how can you streamline your inventory management?

Automate purchasing

Many companies continue to use manual inventory management. However, automating your purchasing processes can save on time and prevent human error. With Profit4, you can set minimum stock levels for each product. Once the stock falls to this level, a purchasing order will be raised automatically. This prevents stockouts from disrupting your business. You can customise these levels between different products and set maximum and optimum levels to suit your requirements.

Real-time updates

Another problem with manual inventory management is that there's often a delay between updates from different departments and teams. For example, let's say your sales team takes a huge order. If you're using a manual system, they may not be aware that there are stockouts for several products in the order. The warehouse team may have this information, but potentially may not have had time to update the system. Profit4 updates in real-time, so your whole team will always be on the same page.

Pricing lists

Aside from losing customers, one of the biggest causes of sales leakage is under-pricing. If pricing is unclear and inconsistent, your sales team may be selling products at a narrower profit, or even at a loss. Profit4 ensures that your staff has clear access to product information, including pricing lists across all sales channels.

Provide great customer service

Naturally, one of the most productive methods of preventing leakage is good customer service. A great experience with your customer service team can be the cherry on the sundae for happy customers - and it can turn around negative experiences too. Here are some ways customer service can reduce sales leakage:

Quick responses

Customers don't want to speak to fifty different departments to get an answer to their query. That's especially true when they need an order update. Profit4 can quickly provide all the relevant information your customer service team needs, significantly reducing waiting times for your customers.

Informed customer service

If customers feel your customer service advisors don't know what they're talking about, they're likely to feel frustrated. With Profit4, your team will have access to information from the sales, warehouse and trade departments at their fingertips. This kind of information would usually require staff to generate reports from different programs or speak with other departments first.


Aside from answering customer queries, your customer service team can alsosuggest other products or services that the customer may be interested in. Profit4 provides tailored suggestions for similar products that customers might want to purchase, including alternative items for out-of-stock products.

Reduce sales leakage with Cloud-based ERP software

Sales leakage affects the bottom line of your business. Through automating essential processes and improving customer service, an ERP software can help to boost your sales and drastically reduce leakage.

Profit4 features many key tools, including automated purchasing, to minimise sales leakage. Plus, it's tailored specifically for wholesalers, distributors and merchants.

If you'd like to learn more, why not watch our 3-minute demo? Or get in touch with our professional customer service team today.

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