Industry research puts the damage between 1% and 5% of EBITDA. For a $2 million agency, that's somewhere between $20,000 and $100,000 a year walking out the door. Not because of bad sales. Not because of lost clients. Just because the operational plumbing has holes in it.

The worst part? Most agency owners have no idea how much they're actually losing. The leakage is invisible by nature. It hides in the gap between time worked and time logged, between time logged and time invoiced, between invoices sent and payments collected.

Let's break down exactly where the leaks happen and what you can do about each one.

> Want to see your number? Use our free Revenue Leakage Calculator to estimate what your agency is losing annually.

What Is Agency Revenue Leakage?

Revenue leakage is the difference between the revenue your agency earns through its work and the revenue it actually collects. It happens when billable work goes untracked, when tracked work goes uninvoiced, or when invoiced work goes uncollected.

This isn't the same as losing a client or getting outbid on a project. Revenue leakage happens on work you already won and already delivered. You did the job. You just didn't get paid for all of it.

For agencies specifically, the most common sources break down into five categories: unbilled time, scope creep without change orders, invoicing errors, write-offs that never get questioned, and tool fragmentation that creates data gaps between systems.

The Five Places Agencies Leak Revenue

1. Unbilled Time (The Silent Killer)

According to a 2026 benchmark study from TMetric covering 250+ agencies, 57% of agencies lose between $1,000 and $5,000 every month to unbilled work. Do that math over a year and you're looking at $12,000 to $60,000 in revenue that simply evaporated.

The root cause is almost always the same: time tracking is painful, so people don't do it consistently. A developer spends 45 minutes troubleshooting a client's staging environment but doesn't log it because the task felt too small. An account manager has a 20-minute call about scope changes but doesn't track it because they were walking to lunch. A designer spends an hour revising a comp based on client feedback they got via Slack, and it never makes it into the system.

Each one of these is small. Collectively, they're catastrophic.

The fix isn't motivational posters about time tracking. It's making time tracking so fast and frictionless that logging a task takes less effort than not logging it. Timer-based tracking that ties directly to a project or ticket eliminates most of the friction. If your team has to open a separate app, find the right project code, and manually enter minutes, they won't do it. And you can't blame them.

2. Scope Creep Without Change Orders

This one is cultural as much as it's operational. Agency teams are people-pleasers by nature. When a client asks for "one more round of revisions" or "a quick update to the homepage," the instinct is to say yes and figure out the billing later. Later never comes.

Research from the same TMetric study found that project managers routinely write off 10-20% of tracked time just to avoid having scope conversations with clients. Think about what that means. Your team is doing the work, logging the hours, and then voluntarily deleting a fifth of it because nobody wants to send an awkward email.

The solution is a clear scope management process that starts before the project kicks off. Write your scope documents like instruction manuals. List every deliverable, every revision round, every meeting cadence. When something falls outside that list, it triggers a change order conversation, not as a confrontation but as a normal business process.

Agencies that implement formal change-order workflows report margins 40% higher than those that wing it. That's not a marginal improvement. That's a completely different financial reality.

3. Invoicing Errors and Delays

One in four invoices contains an error. The average cost per error is $1,870 according to industry benchmarks. Across hundreds of invoices a year, that's six figures of leakage from billing mistakes alone.

These aren't dramatic errors. They're missed line items. Wrong project codes. Tax miscalculations. Time entries that fall through the gap between two billing periods and never make it onto an invoice. Old entries that keep appearing long after they've been billed because the system can't cleanly track what's been invoiced versus what hasn't.

When time tracking feeds directly into invoicing without a manual reconciliation step, 96% of tracked hours get billed versus 77% with manual processes. That 19-point gap is pure profit with no extra delivery cost, no additional hours sold, and no new clients needed.

4. Unquestioned Write-Offs

Every agency writes off time. That's normal. What's not normal is writing off time as a default behavior instead of a deliberate business decision.

When a project goes over budget, the standard move at most agencies is to eat the overage and move on. Nobody asks why it went over. Nobody updates the estimate template for next time. Nobody has a conversation with the client about the additional scope. The hours just disappear from the invoice.

This creates a compounding problem. Your estimates are based on previous projects that were already under-scoped. So the next project gets the same unrealistic budget, goes over by the same amount, and gets written off the same way. Rinse and repeat until your margins are thinner than you can explain.

The fix: treat write-offs like you'd treat any other expense that hits your bottom line. Require a reason for every write-off. Review them monthly. Look for patterns. If the same client, the same project type, or the same team keeps generating write-offs, that's a systems problem, not a people problem.

5. Tool Fragmentation (The Frankenstack Problem)

This is the structural issue underneath all the others. When your time tracking lives in Harvest, your project management lives in Asana, your invoicing lives in QuickBooks, and your reporting lives in a spreadsheet someone built three years ago, data falls through the cracks at every handoff point.

A 2025 agency report from Basis found that the number of agencies using 10 or more tools jumped 131% in a single year. But agency productivity didn't see the same jump. In fact, inefficient processes became the top challenge for 56% of agencies surveyed, followed by rising costs and shrinking profits.

Every time a human being has to manually move data from one system to another, errors happen. Time entries get miscategorized. Billable hours get marked as non-billable. Invoices miss line items that exist in the time tracking system but didn't make the export. And nobody catches it because there's no single source of truth to check against.

The most effective fix is consolidation. Not adding another integration between your existing tools, but moving to a unified platform where time, projects, and billing all live in one place. When a developer logs 45 minutes against a client ticket, that time should automatically be available for invoicing without anyone touching a spreadsheet or running an export.

How to Calculate Your Revenue Leakage

You can't fix what you can't measure. Here's a straightforward way to estimate what you're losing. Step 1: Calculate your potential revenue. Take your total team headcount, multiply by available hours per year (roughly 1,880 after holidays and PTO), multiply by your target utilization rate (aim for 70-80%), and multiply by your average billable rate. Step 2: Calculate your actual collected revenue. Pull your total collected revenue for the same period. Step 3: Find the gap. The difference between potential and actual is your total leakage, including both operational leakage and intentional non-billable time. Step 4: Break it down. Look at each stage of the pipeline: hours worked versus hours logged, hours logged versus hours billed, hours billed versus hours collected. The biggest gap tells you where to focus first.

For most agencies, the biggest leak is between hours worked and hours logged. If you're not tracking time consistently, everything downstream is compromised.

Building a Leak-Proof Agency

Fixing revenue leakage isn't one big project. It's a series of small operational improvements that compound over time. Make time tracking effortless. Timer-based entry, linked to projects and tickets, accessible from wherever your team already works. If it takes more than two clicks to start logging time, it's too many. Connect time to invoicing. The pipeline from logged hours to invoice line items should be one step, not five. No exports, no spreadsheets, no manual reconciliation. Run a weekly unbilled report. Any billable time older than seven days that hasn't been invoiced needs a reason or an invoice. Make this a standing agenda item for your ops meeting. Require written scope and change orders. Not because you don't trust your clients, but because clear expectations protect both sides. The best client relationships are built on transparency, not on silently absorbing overages. Review write-offs monthly. Track them by client, by project type, by team member. Look for patterns. A write-off without a root cause analysis is just a recurring tax on your margins. Consolidate your tools. Every system handoff is a potential leak point. The fewer handoffs between tracking, managing, and billing work, the less revenue slips through.

Revenue leakage isn't dramatic. It doesn't announce itself. It just quietly compounds month after month until you look at your annual numbers and wonder where all that margin went.

The agencies that solve this problem don't work harder. They don't charge more. They don't win more deals. They simply capture the value of the work they're already doing. And that turns out to be worth a lot more than most people realize.